Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

FRIENDS' PROVIDENT LIFE OFFICE BILL

Lords amendments agreed to.

SHEFFIELD CITY COUNCIL BILL [Lords]

Read the Third time and passed, with amendments.

GREATER LONDON COUNCIL (GENERAL POWERS) BILL

Order for consideration, as amended, read.

To be considered tomorrow.

WESTMINSTER ABBEY BILL [Lords]

Read a Second time and committed.

EASTBOURNE HARBOUR BILL [Lords] (By Order)

Order for consideration, as amended, read.

To he considered upon Tuesday next.

GREATER LONDON COUNCIL (MONEY) BILL

Order read for resuming adjourned debate on Question [1st May],

That it be an Instruction to the Committee on the Bill to reduce the total sum of £868,648,000 on page 9 of the Schedule by £83,000,000 by:

(1) reducing the sums mentioned in Item 10 of Part I of the Schedule (Page 6) as follows:

(a) in column 3, by leaving out "£187,700,000" and inserting "£137,700,000" and
(b) in column 4 by leaving out "£86,350,000" and inserting "£61,350,000": and

(2) reducing the sums mentioned in Item 25 in Part III of the Schedule (Page 9) as follows:

(a) in column 2, by leaving out "£60,000,000" and "£64,000,000" and

inserting "£156,000,000" and "£60,000,000", and
(b) in column 3, by leaving out "£30,000,000" and "£32,000,000" and inserting "£26,000,000" and "£28,000,000".—[Mr Geoffrey Finsberg.]

Debate further adjourned till Tuesday next.

Oral Answers to Questions — SOCIAL SERVICES

Kidney Transplants

Mr. Dalyell: asked the Secretary of State for Social Services what results she has so far received from her recent circular, designed to increase the number of kidneys available to transplant units.

The Secretary of State for Social Services (Mrs. Barbara Castle): No such circular has yet been issued by my Department. A guidance circular on the Human Tissue Act 1961 is due to be issued to National Health Service authorities on 12th June and this will be followed by a letter from the Chief Medical Officer to all hospital doctors which will stress the need for more kidneys for transplantation. I will send my hon. Friend a copy.

Mr. Dalyell: Following the delegation to the Department on 11th February, which included the Inner West London coroner, Dr. Thurston, and Professor Roy Calne, will my right hon. Friend confirm that in these circumstances there is no reason why surgeons or doctors should be reluctant to remove kidneys? Will the Government be sympathetic next Session to the introduction of a Bill contracting out along the lines of the Ten-Minute Bill which I introduced?

Mrs. Castle: We have been considering the points raised by the delegation to the Minister of State to which my hon. Friend has referred and we shall be replying in detail very shortly. I stress that the effect of the circular which we are about to issue and of the Chief Medical Officer's letter should help us to get the increased donation and use of donated kidneys that we all want.

Dr. M. S. Miller: Will my right hon. Friend tell the House whether she has had any representations designed to increase the number of baboons available?

Mrs. Castle: No.

Mr. Leadbitter: Will my right hon. Friend bear in mind that there is increasing anxiety about kidney cases? To my

knowledge, in the Northern Region there Is increasing anxiety about the lack of kidney machines both in hospitals and in the homes of patients. Will my right hon. Friend assure the House that her Department will evaluate the position and inform the House of what steps the Government might be able to take to remedy that side of the problem?

Mrs. Castle: We keep the situation under review, and I share my hon. Friend's concern. We aim to double the present number of kidney transplants and to make a real attack on this problem. I shall give consideration to what my hon. Friend has asked.

Supplementary Benefit Appeal Tribunals

Mr. Robin F. Cook: asked the Secretary of State for Social Services if she will discuss the operation of the supplementary benefits appeal tribunals with the Supplementary Benefits Commission.

Mr. Wellbeloved: asked the Secretary of State for Social Services if she will discuss with the Supplementary Benefits Commission the operation of the supplementary appeals tribunal.

The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley): As my hon. Friends know, we hope shortly to receive Professor Bell's report on the operation of these tribunals, and it will, of course, be helpful in considering any suggested changes in the system to know the views of the Supplementary Benefits Commission on aspects which concern it.

Mr. Cook: Has my right hon. Friend received a copy of the report published the other day by the Child Poverty Action Group on its experience of taking complaints to the Council on Tribunals? If he has, will he agree that the quite appalling picture of delay and ineffectual follow-up which emerges in the report greatly strengthens the case for adding a further tier of independent adjudication to the present system?

Mr. O'Malley: I am aware of the document to which my hon. Friend has referred. It is best that we should consider all those matters in the context of the report which we expect to receive from Professor Bell on this subject.

Mr. Wellbeloved: Although I accept the Minister's claim that the supplementary benefit tribunals act in a very fair way, may I none the less ask him not to wait for the Bell Report before dealing with the very important matter of speeding up hearings before the appeal tribunals as this is a cause of considerable concern among a large number of claimants?

Mr. O'Malley: Any delays are of concern both to claimants and to my Department. It is essential that we should keep the length of waiting before a matter is considered as brief as possible. However, we expect to receive Professor Bell's report in the near future. In my view, it would be sensible to make a full examination of all these matters when we have received that report.

Mental Patients (After-care Facilities)

Mr. Parkinson: asked the Secretary of State for Social Services what plans she has for improving facilities for patients discharged from mental hospitals.

The Minister of State, Department of Health and Social Security (Dr. David Owen): We believe that services for the mentally ill need to be jointly planned between the area health authorities and local authorities so as to link hospital and community care. We are doing everything we can to strengthen the work and effectiveness of the joint consultative committees.

Mr. Parkinson: I thank the hon. Gentleman for that reply. Is he aware, however, that there is growing concern throughout the country that community facilities are not developing as quickly as they will need to develop if the Government's policy of getting people out of hospitals is to be implemented? Is he aware that in one of the five hospitals in my constituency there are 160 patients awaiting discharge but that there is nowhere for them to go, and that in another hospital nearly 100 patients are in exactly the same position? From all over the country there is evidence that people are in hospitals who should not be there and that people are being discharged into unsuitable accommodation.

Dr. Owen: I am all too well aware of this. To some extent it is a reflection of the need to restrain public expenditure.

Local authorities are doing their best to make facilities available, and they have done very well over the past few years. The possibilities for us now are to try to see whether we can make an arrangement of cross-financing between local authorities and health authorities, although it is very difficult.

Mr. Kilroy-Silk: Does my hon. Friend accept that many of the mentally ill and mentally handicapped patients in hospitals should not be there on clinical grounds, and that a far stronger initiative should be taken to devolve the responsibility for their care and maintenance on to the community, where it properly belongs? Can he assure the House that he will take energetic and positive steps in this direction?

Dr. Owen: I agree with my hon. Friend's analysis of the problem, one aspect of which is resources. There is also the problem that the health authorities are independent of the local authorities, which provide the personal social services. That is why to join them together and integrate their planning as much as possible is a high priority.

Mr. Norman Fowler: I think the Minister will accept that some of the evidence now coming forward is very disturbing. Does he realise that in Birmingham many ex-patients who have been discharged have simply been transferred to lodging houses, and in two cases to hotels, which are taking 50 or 60 ex-patients? Will he consider making an immediate review of community provision in this area?

Dr. Owen: We know the facts of the situation. The question is one of resources, although I agree that it is possible to be in so-called community care and to be extremely isolated. Therefore, there is still a case for the care and community feeling that can exist in psychiatric or mentally handicapped hospitals, although one of the problems is their size and isolation.

Mr. Greville Janner: Is it not the case that a substantial minority of patients in mental hospitals could be discharged if they had somewhere to go and someone to care for them, and that it costs a great deal more to keep them in hospital than to assist both local authorities and private


organisations, such as Guideposts, which want to care for them but do not have the money?

Dr. Owen: We are doing all we can to help voluntary organisations. This is one area in which we can with limited amounts of money undoubtedly produce considerable results. I shall certainly consider any specific proposals my hon. and learned Friend might put to me.

Montagu Hospital, Mexborough

Mr. Edwin Wainwright: asked the Secretary of State for Social Services it she is aware that there is dissatisfaction in Mexborough and the surrounding districts at the conditions and lack of facilities at the casualty department at the Montagu Hospital; and if she will ensure that this department is improved as a matter of urgency.

Dr. Owen: The Rotherham Area Health Authority is considering with the Trent Regional Health Authority the report of an internal working party which they set up to consider the future of this department. The area health authority intends to consult the Barnsley and Doncaster Area Health Authorities and other local interests as soon as possible.

Mr. Wainwright: Can my hon. Friend say when we can have some results? Is he not aware that the hospital is surrounded by several collieries and other heavy industries, and that the conditions there are probably the worst in the country? The staff are extraordinary, doing their work in a box-like, so-called casualty department which is so small that it takes experts to manoeuvre trolleys. But for the staff, who are doing such an excellent job, there would be tremendous complaints from the public and from patients attending the casualty department.

Dr. Owen: I accept that the existing facilities are less than adequate. The hospital is not a designated accident and emergency centre, and it lacks back-up facilities, but medical staffing is also a problem with the hospital.

Hospital Building Programme

Mr. Tim Renton: asked the Secretary of State for Social Services whether she will publish a Green Paper on a future

programme for hospital building in England and Wales.

Dr. Owen: No, Sir. Hospital building is merely one facet in the development of health services. We hope to publish later this year a consultative document, which will provide background material for choosing priorities for the health and personal social services.

Mr. Renton: Will the Minister reconsider that reply? Is it not a fact that due to the cuts in public spending there are now likely to be substantial delays in hospital building which will affect, amongst others, the people in Mid-Sussex? Would it not be far better for area health authorities and regional health authorities to know where they stand in this matter, rather than for people to believe that there is a new hospital round the corner when there is not?

Dr. Owen: I very much agree with the hon. Gentleman that there is a need for more realism in the hospital building programme. I believe that we have to review the capital expenditure figures, as we have already done. But I am against looking at the hospital capital building programme in isolation from, for instance, the priorities we have just been discussing for mentally handicapped and mentally ill hospitals.

Mr. Speaker: Mr. Raphael Tuck.

Hon. Members: Hear, hear.

Mr. Raphael Tuck: May I thank all hon. Members for the warm welcome home they have given me, and say how glad I am to be back home again.
Is my hon. Friend aware that at the Watford General Hospital there is a tremendous waiting list for operations, which is growing month by month? As the Government have not been able to implement the original plan to rebuild the hospital, will my hon. Friend at least consider providing an additional operating theatre, which would somewhat lighten the burden?

Dr. Owen: If my hon. Friend is right and an operating theatre would lighten the burden and reduce waiting lists, I hope that the area health authority will approach the regional health authority. For the first year ever, the Government have made available £5 million specially


earmarked for the reduction of waiting lists, in the belief that such facilities as my hon. Friend described can do something considerable about waiting lists when we cannot build new hospitals.

Mrs. Knight: Could the Minister produce an interim declaration of intent about vitally urgent hospital building? Is he aware that the radiotherapy unit at Queen Elizabeth Hospital in Birmingham daily constitutes a severe health hazard to patients and medical technicians, due to the cessation of development work in the hospital?

Dr. Owen: I think that the hon. Lady is not quite correct. I believe that because of stringent safety precautions taken in the hospital there is no threat, but the facilities in which those concerned operate are less than adequate. I am afraid that this is a fairly familiar picture. We have reviewed the expenditure implications for this year and next year. Regional health authorities are conducting a survey of all their hospital building programmes, and they hope before the end of the year to be able to present a plan on which we shall be able to make steady progress over the next few years.

Mr. Loyden: May I draw my hon. Friend's attention to the need to explore some of the difficulties in the current hospital building programme, particularly as it relates to the Liverpool Teaching Hospital? Grave concern is being expressed because of the lack of information on the future of the hospital.

Dr. Owen: I shall gladly furnish my hon. Friend with details about that hospital building project. I share his concern. It is late, and it has been extremely expensive. It is one of the projects causing the most anxiety at present.

Prescription Charges

Mr. Newton: asked the Secretary of State for Social Services what is her policy towards the level of prescription charges.

Mrs. Castle: Our policy is to phase out these charges as economic circumstances and the resources available for the health services permit, and we have already abolished prescription charges for women over 60 and for chilldren up to 16 years of age.

Mr. Newton: In view of the widespread concern shown in the previous questioning about the steady deterioration in hospital services, not least in the Chelmsford and Colchester districts, which concern the area that I represent, does the right hon. Lady agree that it is time she set her face firmly and finally against anything which will add to the starvation of resources from which the hospital service is now suffering? In the light of that starvation of resources, will she reconsider what she has just said and say that she has no intention of abolishing prescriptions charges and that she will review her policy about pay beds?

Mrs. Castle: The answer to both those questions is "No. Sir." It is an integral part of our approach to the health service that it should be free at the point of use. People should be taxed in order to provide the services when they are healthy and not taxed or subjected to protion charges or anything else prescript when they are sick. That remains our policy. Only about 3 per cent. of the finances of the National Health Service comes from charges, so that even if we doubled them they would represent only a minute part of the budget that the National Health Service commands.

Mr. Dempsey: Will my right hon. Friend consider doing something for those who regularly receive prescriptions and have to pay the charges? Has she considered, for example, a diabetic person who might receive as many as seven individual prescriptions a week, which represents an immense burden on the average working man's budget? Cannot she do something to relieve the economic pressures in such circumstances?

Mrs. Castle: It is because prescription charges weigh so heavily on the chronic sick that we are pledged progressively to phase them out. In the meantime I remind my hon. Friend of the prepayment certificate scheme which exists precisely to help people who have to incur a steady and continuing high expenditure on drugs. A certificate costs an average of about 1p a day. I suggest to my hon. Friend that he should draw this to the attention of the person he has in mind.

Mr. Boscawen: Does the right hon. Lady accept that the amount of money


derived from prescription charges is not the main point? The real point is that the imposition of prescription charges helps to save an enormous amount of waste in the prescribing of drugs which are not always needed.

Mrs. Castle: I do not accept that the levying of a charge at a level which any hon. Member would consider acceptable would have that kind of disincentive effect. Responsibility for prescribing wisely but economically rests with the general practitioner.

Hearing Aids

Mr. Canavan: asked the Secretary of State for Social Services if she will make a statement on the priorities of her Department in the issue of free behind-the-car hearing aids.

The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): As my hon. Friend will be aware, present priority groups include mothers with young children, people with additional handicaps or an exceptional medical need. By the end of April over 12,000 of the new aids had been issued to these groups. As regards future priorities, consultations are still not yet complete but my right hon. Friends the Secretaries of State for Scotland and Wales and I intend jointly to make a statement shortly.

Mr. Canavan: Will my hon. Friend give due regard to the representations which have been made by the Scottish TUC, by myself and by at least one of my constituents that due priority be given to workers who require these behind-the-ear hearing aids for health, safety and efficiency at work? At present, workers who require such aids have to buy and maintain them at considerable personal expense.

Mr. Morris: We are still consulting the health service authorities. We have consulted the relevant professional and voluntary organisations. I cannot say who will be in the next priority groups, but it seems eminently likely to me that people in employment and those receiving education will be given a very high priority.

Mrs. Chalker: Is it correct to say that the Minister's priorities include not only

hearing aids but the need to look at the delays in the provision of other aids, particularly for children, as was cited in a case yesterday? In that case a two-year-old child has had to wait for over a year for an appliance to assist him to walk. Will the Minister look into these delays? They are disastrous in some parts of the country, particularly for small children.

Mr. Morris: The hon. Member has raised an entirely different matter. She is referring to orthopaedic appliances. I was dealing in my reply with the new behind-the-ear hearing aid. I have, however, noted her point and I am making detailed inquiries.

Mr. Alexander Wilson: Will my hon. Friend explain to my hon. Friend the Member for West Stirlingshire (Mr. Canavan) that he came to the Hamilton constituency not so long ago to open the only factory in Scotland which manufactures these much-improved hearing aids? Will he ensure that the hearing aid centres in Britain are allowed to move as fast as their capabilities permit on the question of the priority groups?

Mr. Morris: I am grateful to my hon. Friend for making that point, and I pay tribute to his constituents who produce the new cosmetic hearing aid for the National Health Service. My hon. Friend has raised an extremely important point. It is likely that some hearing aid centres will be able to move more quickly than others in dealing with priority groups. I shall see that all our resources are used to the best possible effect.

Doctors (Training Costs)

Mr. Bryan Davies: asked the Secretary of State for Social Services what she estimates to be the element of subsidy involved in the training of doctors within the NHS who subsequently practise in the private sector.

Mrs. Castle: The current identifiable revenue cost of training a doctor to qualification is about £28,000 of which rather more than half is for training in the medical school as distinct from the NHS. The capital cost of providing a new medical school place is about £12,500, not counting the NHS hospital facilities. Training within the NHS continues after qualification, but the cost is difficult to


identify: it depends on how long training continues, and at this stage the doctor is providing services.

Mr. Davies: Does my right hon. Friend accept that on the basis of those staggering figures those who argue for an extension of private practice, on the whole to benefit the better-off, should admit honestly that it would involve an enormous hidden subsidy from the NHS in terms of the contribution of the ordinary taxpayer?

Mrs. Castle: The figures certainly justify our determination to put first and foremost the strengthening and the interests of the National Health Service rather than of private practice. They indicate how much on health matters we are as a society interdependent, and we should behave with a consciousness of that fact.

Dr. Vaughan: Does the Secretary of State accept that the most serious loss to this country is not from doctors going into private medicine but from doctors emigrating? What does she intend to do to encourage doctors to stay in this country?

Mrs. Castle: I am surprised that the hon. Member is so anxious to expose the lack of patriotism among certain doctors. That is a matter on which I should have thought he would do better to keep quiet and instead call on doctors to discharge the debt they owe to this country in terms of the training it has given them.

Mr. Cryer: Does my right hon. Friend realise that the Secretary of the BMA has said that the Common Market will be a device to remove the shackles of the National Health Service from doctors in this country? Will she resist any attempt to make easier the movement of doctors throughout the Common Market, thus preventing doctors going into private practice in other Common Market countries on the basis of greed instead of need until there is established throughout the EEC the sort of National Health Service that exists in Britain?

Mrs. Castle: I am aware of the statement by the Secretary of the BMA. However, I must inform my hon. Friend that under the free movement of labour and the free right of establishment provisions of the Treaty of Rome, a directive allow-

ing the free movement of doctors has already been agreed.

Mr. Evelyn King: Will the Secretary of State accept that her argument cannot logically apply only to doctors? The end of the road must be that every graduate who at any time has had public help with his education must work for the State. Is that not a ludicrous proposition?

Mrs. Castle: Of course the hon. Gentleman is right that any question of, for instance, forced recovery of training fees would raise far-reaching principles and would affect not only the medical profession. Nevertheless, it is worth bringing into the light of day the sort of figures I have given this afternoon in the hope of inculcating a sense of debt towards one's country.

Pay Reviews

Mr. Beith: asked the Secretary of State for Social Services whether she will list those professions in the health and social services whose remuneration is determined as a result of recommendations of a review body rather than by collective bargaining.

Mrs. Castle: The independent Doctors' and Dentists' Review Body advises the Prime Minister on the remuneration of doctors and dentists taking any part in the National Health Service.

Mr. Beith: Does the right hon. Lady recall the comments she made when the doctors' settlement—which for family doctors was over 38 per cent.—was announced? Does she recognise that, in saying that when collective bargaining does not occur the social contract cannot apply, she makes a gaping hole in the Government's pay policy by applying no restraint to those professions which are the subject of review bodies, which is grossly unfair to those who settle within the social contract?

Mrs. Castle: It has always been the policy, certainly of the present Government, not to operate any incomes policy, voluntary or otherwise, at the expense purely of the public sector. That is the point, and it is on that basis that the principle of fair comparison has always guided the review bodies which have fixed the remuneration of doctors and dentists and, indeed, of other groups in our society.


That is a fair principle. Where there is no free collective bargaining, as with doctors and dentists, there must be some criterion, and the criterion is the movement of wages and salaries in outside industry.

Mr. Tomlinson: Does my right hon. Friend recognise that there are some areas within the National Health Service in which collective bargaining operates and that the fact that we have needed to appoint review bodies is symptomatic of the need for the total review of the Whitley Council machinery, which although it served us well in the past is today perhaps not the most appropriate form of collective bargaining?

Mrs. Castle: I am well aware of the point of view expressed by my hon. Friend. Indeed, I expressed it myself following, for instance, the difficulty we had over nurses' pay last year. It was revealed that nurses had fallen badly behind under the Whitley machinery and, therefore, the Prime Minister set up the special ad hoc Halsbury Review Body to bring nurses' pay into line. That was followed by other ad hoc reviews for other groups in the National Health Service. At that time I said that I was only too willing to consider the Whitley Council machinery, and, indeed, I have already set that operation on foot. I have invited the staff representatives concerned to let me have their ideas on how they think the machinery might be improved. I met the general purposes committee of the general Whitley Council as recently as 28th May but I made clear that it is for the staff to decide on the nature of the representative and negotiating machinery they want and that it is not for me to impose changes from above.

Mr. Steen: Has the Secretary of State any idea of the catastrophic situation that is developing in some schools where for identical work school nurses without health visitors' certificates are earning up to £1,000 a year less than is earned by school nurses with health visitors' certificates? Is the right hon. Lady aware that this anomaly is caused by the failure of the negotiating machinery, and will she take steps to do something about it right away?

Mrs. Castle: I repeat that first and foremost it is a matter for the staff repre-

sentatives to initiate changes to improve the negotiating machinery. I am perfectly receptive to considering any changes. That is why I have invited consideration of the whole Whitley Council machinery. I have appointed Dr. McCarthy, a Fellow of Nuffield College, Oxford, on a part-time basis as my adviser on industrial relations. He is helping us with the review of the Whitley machinery, but the initiative must come from the staff.

Mine Workers (Industrial Disease)

Mr. Golding: asked the Secretary of State for Social Services how many mineworkers are drawing social security benefits in respect of pneumoconiosis, emphysema and bronchitis, respectively.

Mr. O'Malley: The latest estimate is that about 38,000 people are receiving benefit for pneumoconiosis attributed to mining. Comparable figures are not available for emphysema or bronchitis.

Mr. Golding: Is it not important that the Minister should obtain the figures for emphysema and bronchitis, because with the pneumoconiosis figures they would indicate the true cost of getting coal? Is it not time that he took steps to prescribe emphysema and bronchitis as industrial diseases, not only for mine workers but also for pottery workers, foundrymen and slate workers?

Mr. O'Malley: I understand that some studies indicate that miners suffer more from bronchitis and emphysema than does the population as a whole. However, many factors other than occupation are involved. For example, testimony of the link with occupation is not significant enough to satisfy the prescription conditions.

Mr. D. E. Thomas: Is the right hon. Gentleman aware of the great and continuing dissatisfaction among slate-quarrying communities about the use of radiographic evidence in assessment for benefit? Will he institute an inquiry into this matter? I am aware that there was an inquiry in 1973, but there is now need for a new inquiry into the way assessment is made for benefit.

Mr. O'Malley: Part of the hon. Gentleman's supplementary question hardly arises out of this Question. As I come


from a coal mining area, I fully understand and appreciate the strong views which are held in mining areas on the subject raised in the Question. The difficulty is that before one can prescribe a disease as an industrial disease attracting benefit under the Industrial Injuries Scheme, one has to have significant evidence of a direct link between the occupation and the disease. Unsatisfactory though it may be in mining areas, the situation is that at this time the evidence does not provide precisely the link that is required before prescription can be made.

Mr. Woodall: Does my right hon. Friend accept that many Government supporters with long connections with the mining industry have long been concerned about the high incidence of emphysema and bronchitis? Will he press his right hon. Friend the Secretary of State to authorise an investigation into the connection between these two diseases and mining with a view to listing the two diseases?

Mr. O'Malley: I know that there is strong feeling on this matter among Government supporters, of which I am one, and my hon. Friend is right in saying that there is need for detailed studies. Studies on bronchitis and emphysema have been and are being conducted in the mining industry, and my Department's advisers are keeping a close watch on all those studies.

European Community

Mrs. Chalker: asked the Secretary of State for Social Services when next she proposes to meet Health and Social Services Ministers in the other EEC countries.

Mrs. Castle: I hope to do so as opportunity offers in the course of Community business or otherwise.

Mrs. Chalker: Will the right hon. Lady take specific steps to exchange information with the other eight members of the EEC so that we can discover from them their great advances and disclose to them some of our benefits? We know how much this country needs help, and the EEC would benefit from our experience.

Mrs. Castle: I agree with the hon. Lady that the EEC needs some of our

policies, notably in the health service sphere, because there is no complete coverage of health service provision in the Community countries, as there is here. That is why I have already in past months been exchanging information with these countries. For instance, in November I went to Bonn to sign a reciprocal health agreement with the Federal Republic of Germany which is designed to give our self-employed when they visit the Federal Republic the same kind of health treatment that the self-employed from that country get when they come here. Therefore, I agree that it is important that we should learn from each other. While I was in Bonn, I was glad to study the many advances which the Social Democratic Government of the Federal Republic had made in the social security sector, and they were interested to share in our advances.

Mrs. Winifred Ewing: Is the right hon. Lady satisfied with the equality of the reciprocal arrangements made for United Kingdom citizens and citizens of member States? Will she tell the House in which countries the position is not equal for citizens of the United Kingdom and what she proposes to do about it?

Mrs. Castle: The hon. Lady has mentioned a very wide area indeed. We have reciprocal arrangements under the EEC regulations over a considerable area, but there are gaps to which I have referred, notably concerning non-employed and self-employed persons. These categories get far more comprehensive and automatic coverage under our health service and social security system than in the Community. We have signed a health agreement with Denmark and we are waiting for the agreement which I signed with Bonn to be ratified shortly.

Mr. Ronald Atkins: Is my right hon. Friend aware that we get greater value at less cost from the health and social services of this country than is obtained in any other country in the world, including the other EEC countries? Will she show those countries how they can reach our high standards?

Mrs. Castle: I think my hon. Friend is right in saying that we get greater value for money from our expenditure on health care in this country, thanks to the existence of our comprehensive and centrally


administered, organised and planned health service. Certainly there is a marked difference in this respect between the United Kingdom and the United States, which I visited recently.

Bonemeal

Mr. Christopher Price: asked the Secretary of State for Social Services if she will list the bodies which have made representations to her about the labelling and the sterilisation of bonemeal.

Dr. Owen: The only representations my Department has received in 1974 and 1975 are from the Housewives' Trust.

Mr. Price: Is my hon. Friend aware that since the death of one of my constituents last year from anthrax, after handling an ordinary packet of bonemeal bought in the shops, his Department and the Ministry of Agriculture, Fisheries and Food have been extremely dilatory in taking more appropriate measures to ensure that this sort of thing does not happen again? Has my hon. Friend ever seen the warning notices on packets of unsterilised bonemeal? Short of a complete ban on the sale of bonemeal, will he take steps to ensure that the warning notices are immediately made very much larger?

Dr. Owen: As my hon. Friend knows, I share his concern. As a result of the tragic death of one of his constituents I asked the Ministry of Agriculture, Fisheries and Food and my Department to set up a working group to consider this matter. The working group has met twice and it has asked about the experience of other European countries. It has not had replies to all the questionnaires, but some countries require sterilisation of bonemeal. I agree with my hon. Friend that this is an issue that must be seriously considered.

National Health Service Finance

Mr. Grylls: asked the Secretary of State for Social Services if she has any plans for obtaining additional finance for the NHS.

Mrs. Castle: Plans for the NHS will be carefully reassessed in the 1975 public expenditure review, in which our aim will

be to ensure in the light of the latest assessment of economic prospects that the most essential needs are met as far as possible. As I told the House on 2nd December last, additional sums have been provided in 1975–76 in order to restore some of the cuts made by the previous Government. Planned expenditure will be about 4 per cent. higher in real terms than in 1974–75.

Mr. Grylls: Is the right hon. Lady aware that she is cutting the income of the National Health Service at a stroke by £50 million by banning pay beds? Does she not realise that there is a need for extra finance for the health service and that it is not likely to come from the Exchequer? Will she investigate a scheme for making a modest charge for all hospital beds for those who can afford it or for those who have insurance? Does she agree that this would bring in the extra money which is so desperately needed for the service?

Mrs. Castle: The hon. Gentleman is quite wrong in what he has said about pay beds. We are making up to 4,000 additional hospital beds available for National Health Service patients. That is a very good return for the loss of the pay bed revenue, which has never completely economically covered the cost.

Mr. Alexander Wilson: Will my right hon. Friend accept my advice that if she is looking for extra finance for the National Health Service, as we all are, she can start by selling the monstrosities that we have in Scotland at Holy Loch—namely, the Polaris submarines—so that she will have enough money for National Health Service centres?

Mrs. Castle: I am well aware of my hon. Friend's views on that matter. Of course, the Government have reviewed defence expenditure and have included it in the public expenditure reductions and restraints that we have had to make. It is a question of balancing all the different demands in our society for all the forms of expenditure that we could all press to see increased. I have noticed how very often Conservative Members are in favour of public expenditure cuts in general but are in favour of public expenditure increases on every political item.

Mr. Norman Fowler: Is not my hon. Friend the Member for Surrey, North-West (Mr. Grylls) correct? Given a situation in which the National Health Service is desperately short of resources, how can the right hon. Lady justify throwing away millions of pounds by abolishing pay beds? How does she reconcile her policy with the calls from her Cabinet colleagues for cuts in public expenditure?

Mrs. Castle: And how can the hon. Gentleman possibly describe a policy which makes available up to 4,000 more beds for National Health Service patients as the throwing away of millions of pounds? Indeed, in the letter which has gone out from my Department to the regional health authorities about the reduction of pay bed authorisations through the under-utilisation exercise, we are asking the authorities to bear in mind in their future spending plans that these additional beds will be available. We are asking them to let us know how they intend to use them in the interests of the National Health Service.

EUROPEAN COMMUNITY

Mr. Tim Renton: asked the Prime Minister when he next plans to meet the EEC Heads of Government.

The Prime Minister (Mr. Harold Wilson): Arrangements are being made for a meeting of Heads of Community Governments in Brussels on 16th–17th July.

Mr. Renton: At that meeting in July, how does the Prime Minister hope to convince his European counterparts of his intention to play a full and constructive part in Community policies when at least three of his Secretaries of State most directly involved—namely, those of Trade, Energy and Industry—have made public their hostility to the Community? Surely, for the right hon. Gentleman's Government to be credible in Europe at least the pack needs to be shuffled and re-dealt.

The Prime Minister: Unfortunately for the arguments of the hon. Gentleman, which describes a situation which ended last Thursday, the Heads of Government of the Community countries do not agree with his assessment of the position in this country. I think they have got it

rather more clear in their minds than he has in his.

Mr. Watkinson: Will my right hon. Friend raise with the French President the question of his recent speech in which he advocated a two-tier structure in the EEC, echoing the comments of ex-Chancellor Brandt? What is the Government's attitude to this policy line of the French President? Will my right hon. Friend say that he is opposed to it?

The Prime Minister: I have made clear all along that decisions are taken in the EEC at the Council of Ministers or at Heads of Government summits. There are no two-tier arrangements. Should the question of any speech of a Head of Government appear on the agenda, I shall make appropriate comments on it.

Mrs. Thatcher: When the Prime Minister next meets the EEC Heads of Government, will he confer with them about how they have been able to reduce the rate of inflation in their countries, whereas under this Government the value of the Wilson pound in the pocket has fallen faster than ever before and is now worth less than 80p in the pound?

The Prime Minister: Yes, Sir, and I think they will probably tell me that they do not have Oppositions which put forward inflationary policies every day of the week.

Mrs. Thatcher: Is it not more likely that they will tell the Prime Minister that they have effective Heads of Government who can take action?

The Prime Minister: No, Sir. If I were to press them further, as the right hon. Lady suggests, they would say first that unemployment had risen a great deal more in their countries than in ours and that the level of national production had fallen more in the world depression than in this country. They would also note that the policies of the right hon. Lady are directed to more unemployment.

Mr. McCrindle: asked the Prime Minister what recent discussions he has had with the Heads of Government of EEC countries.

The Prime Minister: The last meeting of EEC Heads of Government was in March, but I met most of them at the


ministerial meeting of the North Atlantic Council in Brussels on 29th and 30th May. This meeting enabled members of the Alliance to reaffirm convincingly their commitment to NATO. We had a valuable discussion on a wide range of current issues. My visit also provided a welcome opportunity for bilateral talks with a number of allied leaders. Copies of the communiqué issued after the meeting had been placed in the Library of the House.

Mr. McCrindle: Turning perhaps a little more to the future, is not the Prime Minister dismissing all too airily the need, after last Thursday's vote, to reassure our European partners of our determination to play a full part in Europe? Is it not desirable that we should now be encouraging British firms to invest in Europe and vice versa? How can three of his Secretaries of State—who were, to say the least, unenthusiastic about the policy endorsed by the British people—continue to play a leading part in the Labour administration? Does not this indicate that the Prime Minister is seeking to placate the Left in his party rather than to reassure our friends in Europe about our future intentions?

The Prime Minister: To take the serious parts of what the hon. Gentleman put before the House—namely, the first two of his three points—it is certainly the fact, as I emphasised yesterday, that we intend to play a very full part in the co-operation within the Community, and we are strengthened in so doing by the historic vote last Thursday.
I referred to the question of investment in a statement on Saturday to the Nottinghamshire miners and I referred to that matter again yeserday in the House. I agree that it is a serious point, and there will be a two-way investment process. We look forward to a great increase in investment in this country by the EEC and by third country investors.

Mr. Whitehead: So that Europe may now expand and not stagnate, will my right hon. Friend take up, if he has not already done so, with the other EEC Heads of Government the question of the admission of Portugal to the EEC, since that is the expressed wish of the democratic parties of Europe and would be

the best protection for the Portuguese people against totalitarianism on the Left or on the Right?

The Prime Minister: When my hon. Friend refers to stagnation in Europe, I would remind him that the stagnation in industry has occurred more seriously across the Channel than here. This is due to the biggest world depression—a depression caused largely by the oil crisis—since the 1930s. We are discussing within Europe and more widely how we can act internationally to deal with these questions.

Mr. David Steel: Will the Prime Minister confirm that at his previous meetings with Heads of Government his reservations about direct elections to the European Parliament were related solely to the fact that at that time the referendum had not taken place, and that the Government have no other reservations on this question?

The Prime Minister: I dealt with this question yesterday and intimated that while the Parliamentary Labour Party had reservations about membership of the European Assembly, that is now over and the matter will be decided very quickly by a democratic vote of the Parliamentary Labour Party, as I made clear yesterday.
The question of direct elections is an entirely separate matter and must be considered. I was interested in the remarks of the hon. Member for Saffron Walden (Mr. Kirk), who leads the Conservative delegation to the European Parliament, in his broadcast this morning, but this will be a matter for the House as a whole to decide.

COMMODITY MARKETING

Mr. Bates: asked the Prime Minister if the group of Commonwealth experts examining the proposals for a general agreement on commodities have yet reported.

The Prime Minister: The group of Commonwealth experts have not yet reported. They are meeting for the first time today. They are expected to submit an interim report in time for a meeting of Commonwealth Ministers in August.

Mr. Bates: Is my right hon. Friend aware that there is a widespread welcome for the initiative in the communiqué to transfer real resources from the developed to the developing countries by international co-operation in trade and in primary commodities? Since, despite our present difficulties, we have remained one of the richest nations in the world, will he be assured that Labour Members will give widespread support for this type of programme? With which other international groups is he pursuing such initiatives on commodities?

The Prime Minister: I am grateful to my hon. Friend. As he knows, this initiative was warmly welcomed by the Commonwealth and has been referred to the study group to which I referred in my main answer. It has also been warmly welcomed by the United States, and particularly by the United States Secretary of State. The French and other Governments have given it a fair wind and it has been warmly received by the OECD. This is an important initiative—indeed, one of the most important for a very long time—in terms of world trade and the relations between developed and developing countries. I hope that before long there will be a chance to debate the matter in the House. I hope that we shall get a similarly warm reception from the Opposition in favour of a scheme which has been so widely adopted and supported throughout the world.

Mr. Ian Lloyd: Is not the new economic international order, with its galaxy of commodity agreements to which the Prime Miinster committed this country in Jamaica, far more far-reaching in its economic effects on the United Kingdom than anything the Commonwealth is likely to do? How soon will the House have the chance to discuss this matter in detail?

The Prime Minister: The hon. Gentleman is right to say that the matter is of fundamental importance. It is important to us as consumers of imported commodities because we have not gained any more than have the primary countries from boom and bust in commodity affairs. This is a very important matter for this country, but I hope the hon. Gentleman will recognise that this initiative has been warmly supported by advanced as well as by developing countries.

REFERENDUM

Mr. Canavan: asked the Prime Minister if he will make a statement on the result of the Common Market referendum.

The Prime Minister: I did so yesterday, Sir.

Mr. Canavan: Will the Prime Minister re-emphasise that the referendum was on Common Market membership only and that the result cannot in any way be interpreted as a victory for certain minority factions who are now demanding various insane policies—such as coalition, a statutory wage freeze and separatism—as well as conducting a disgraceful witch-hunt against some of our most successful Socialist Ministers simply because they were anti-Market?

The Prime Minister: I am happy to find myself in agreement with my hon. Friend. The ballot paper which I completed, after due consideration and study of the arguments and speeches, including my own, contained a simple question requiring a "Yes" or "No" to our remaining in the Common Market. That was all the country voted on. Those who have read into it other things are quite wrong, although my hon. Friend might be forgiven a little for taking the view that it was repudiation of one very noisy faction north of the border.

Mrs. Bain: In view of the fact that reference has been made to separatism, will the Prime Minister agree that many people in Scotland seek separate representation for the people of Scotland in any European body since it will affect the welfare of the Scottish people? Will he accept that in the absence of a head of Government of Scotland, the people regard him, at least on a pro tem basis, as the head of such a Government? Will he therefore concede the policy of the Scottish National Party involving direct representation by the people of Scotland in Europe?

The Prime Minister: Flattery will get the hon. Lady nowhere, but I am happy to feel that I made two speeches, in Aberdeen and Glasgow—

Mrs. Winifred Ewing: Not many came, Harold.

The Prime Minister: It seemed to me that the general vote in Scotland was in favour of what I was advocating there. With regard to separatism, the hon. Lady will be aware—and I am surprised she has not made more of the point—that two Scottish regions voted against membership. However, it seems to me—and others take this view—that this was more a repudiation of the desire to be linked with an independent Scotland than with anybody else.

Mrs. Bain: Come up to Stornoway.

Mr. Hordern: Now that the referendum is over, when can we expect the Prime Minister and the Government to take action to deal with our serious economic situation? Does the Prime Minister appreciate that it is a question not only of replacing those Ministers whose attitude towards the EEC was a contrary one but of their competence in dealing with these economic matters? Does he agree with the Home Secretary that it is difficult to understand how the Secretary of State for Industry can be taken seriously as a Minister dealing with economic affairs?

The Prime Minister: As to the last part of that question, I am sure that the hon. Gentleman would not wish to become more of a bore than the Almighty originally made him.
With regard to the serious part of the hon. Gentleman's question—I always try to deal with the serious parts of these matters—this action is going on all the time. He will know that it was fully set out by the Chancellor and myself in a recent economic affairs debate. If he was present on that occasion, as I think he was, he knows that not a scintilla of a new policy emerged from the Opposition Front Bench on that occasion.

Mr. Wellbeloyed: In view of the decisive referendum result and the probability that the Parliamentary Labour Party might take a reasonable decision and agree to full and enthusiastic participation in the European Parliament, will my right hon. Friend ensure that mercy is tempered with justice by arranging for a fair proportion of ex-anti-Marketeers

to be consigned to the European Parliament?

The Prime Minister: I am not quite sure about the use of the word "consigned". I said yesterday that I hoped there would be a decision now so that the House could be fully represented at the Assembly. I also expressed our hope that those responsible for the selection of Members would ensure that they represented all points of view. Yesterday I paid a tribute to the Conservative Party. In selecting its representatives, the Conservative Party did not confine itself to those who were wholeheartedly in favour of membership of the Community.

Mr. Wigley: In view of the desire of the Prime Minister for the people of Wales and Scotland to play a constructive part within the EEC, will he say specifically what steps he intends taking to give Wales and Scotland representation on bodies within the EEC, such as the Commission, the European Parliament and the Economic and Social Committee?

The Prime Minister: I am not quite sure what the hon. Gentleman means when he refers to these institutions, the Commission or other bodies. If he refers to the Assembly, these are obviously matters which must be considered. I want that body to be representative of the House as a whole. We must take account of the fact that the membership of the House as elected is very largely distributed between the two major parties, which must be adequately represented.

LIMITATION BILL [Lords]

Ordered,
That the Limitation Bill [Lords] be referred to a Second Reading Committee.—[The Attorney General.]

STATUTORY INSTRUMENTS

Ordered,
That the Counter-Inflation (Price Code) (Amendment) Order 1975 (S.I., 1975, No. 864) be referred to a Standing Committee on Statutory Instruments.—[Miss Boothroyd.]

RAPE (ANONYMITY OF VICTIMS)

3.34 p.m.

Mr. F. P. Crowder: I beg to move,
That leave be given to bring in a Bill to provide anonymity for victims of illegal rape in criminal cases except by direction of the court.
I think that I should in fairness remind the House that the measure is not inappropriate, since this is for the second time of asking. I last raised this matter on 30th July 1974, when the House was good enough to let it go through unopposed.
I draw the attention of hon. Members to the last six words of the motion, which read,
except by direction of the court.
We all know that from time to time there are in cases of rape instances where it would be of assistance to the defence for the name and address of the alleged victim to be published. Hell hath no fury like a woman scorned. There are women who, out of sheer spite and venom, will, quite unjustly and wrongfully, accuse persons of having raped them. Sometimes they make a habit of it. Therefore it is important that in such instances application should be made to the court by counsel for the defence and it should be in the discretion of the learned judge whether the name and address of the offending female should be published.
I believe that all hon. Members will agree that this is not a controversial political measure. But it is a matter of some importance. During the past two General Elections we have heard a great deal, especially from members of my party, about law and order and the majesty of British justice, but precious little seems to have been done about it by members of either side of the House. This matter is very much in the public eye at the moment. I raised the matter in the House of Commons in July 1974, but no steps seem to have been taken since then.
There is one redeeming feature. To my certain knowledge one or two of Her Majesty's judges have invoked this measure, which perhaps they had no right to do, as if it were law. However, in my respectful submission, it should be law.
There is one statistic which we do not know—I refer to the number of victims of rape—because the females concerned do not wish to face the appalling publicity, not only in the national Press but in their local neighbourhood and local newspapers, and refuse to come forward and give statements to the police. I say that for this reason. I do not think that all hon. Members appreciate what that involves. In such a serious matter it means that the unfortunate lady has to go to the police station and experience a long period of interrogation. Some weeks later she must attend the magistrates' court. If Section 1 of the recent Act is not invoked she must give evidence. She will probably have to spend half the day waiting at court in some trepidation. She will face cross-examination. She must then wait three or four months before the case comes before the Crown court. She may then find that she must wait for a day or a day and a half and then be subjected to the glare of publicity. Inevitably the defence will be one of consent.
There was a recent case in East Anglia, curiously enough, in which a lady who had a professional career on the stage found herself in that situation. The defendant was a police officer. The lady involved was subjected to what I have described as the defence of consent. I make no mention of the present case which is in the public eye, because it is sub judice.
All hon. Members know that the onus of proof is upon the Crown. That means that before a jury can convict it must be sure to the point of certainty. If there be real hesitation or doubt in its mind, such doubt, by the law of England, must be resolved in favour of the person being tried. If in such circumstances the defence of consent is put forward, and if it succeeds on the basis that a doubt is left in the mind of the jury, that unfortunate lady will be pointed out for ever after. There will be nods and discreet winks and pointing fingers, although it may well be that she has told the court the truth.
I cannot see that, provided the courts have discretion to put in the name and address of the lady if asked to do so by the defence, anything will be lost by retaining the anonymity of the alleged victim in a case of rape. Accordingly, I


ask the House to support this measure without a vote.

Question put and agreed to.

Bill ordered to be brought in by Mr. F. P. Crowder, Mrs. Jill Knight, Mr. Maurice Edelman and Mr. Geoffrey Finsberg.

RAPE (ANONYMITY OF VICTIMS)

Mr. F. P. Crowder accordingly presented a Bill to provide anonymity for victims of illegal rape in criminal cases except by direction of the court: and the same was read the First time; and ordered to be read a Second time upon Friday 11th July and to be printed. [Bill 172.]

Orders of the Day — FINANCE (No. 2) BILL

(Clauses 5, 17, 23, 25, 28, 49 and 60)

Considered in Committee [Progress, 20th May].

[Mr. GEORGE THOMAS in the Chair.]

Clause 28

ALTERATION OF PERSONAL RELIEFS

3.41 p.m.

Sir Geoffrey Howe: I beg to move Amendment No. 69, in page 18, line 37, at end insert—
'(c) after subsection (1) there shall be added the following subsection:—
(1A) If the claimant is liable to Class 2 and Class 4 contributions under the Social Security Act 1973, the deduction to be allowed under this section shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner."'.

The Chairman: With this we may also discuss the following amendments:

No. 59, in page 18, line 37, at end insert—
'(c) at the end of paragraph (b) of subsection (1) there shall be added the following:—
except that in the case of a claimant liable to Class 2 and Class 4 contributions under the Social Security Act 1973, this deduction shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner.'.

No. 68, in page 18, line 37, at end insert—
'(c) at the end of paragraph (a) of subsection (1) there shall be added the following:—
except that in the case of a claimant liable to Class 2 and Class 4 contributions under the Social Security Act 1973, the deduction shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner."'.

Sir G. Howe: This group of amendments gives the Committee an opportunity to discuss certain policies of the


Government which have caused widespread resentment throughout the country amongst the many people who are self-employed and work for themselves and, hopefully, an opportunity to do something to correct the injustice from which these people now suffer. I refer to the large and increasingly intolerable burdens that the Government have been heaping, in a way that can only be described as vindictive, on all those who work for themselves and make up the self-employed.
The Committee ought to acknowledge that the self-employed represent an important section of our community—about 2 million people—and, what is more, a dynamic section from whose endeavours new businesses, jobs and prosperity can, and often do, grow, even in these hard times.
The entire concept of individual enterprise does not, and never will, fit easily into the kind of Socialist society to which this Government are committed. That is why the self-employed—those who run the small businesses of this country and employ about 6 million people or a quarter of our work force—are, and feel themselves to be, facing a combination of burdens which they regard as profoundly unfair: hugely increased local government business rates, increased income and corporation taxes, high interest rates, capital transfer tax and the prospect of a wealth tax. They also see a particular injustice in the decision by the Government to extract from them, in the form of national insurance contributions, a further £21 million, apparently for no benefit whatsoever.
In the many debates that we have had on this subject, both sides of the Committee have recognised—I have always made this clear—that improvements in pensions have to be paid for. So have improvements in other social benefits. Each class in the community must pay its fair share for those improvements. Even so, we must recognise that the self-employed are not eligible for unemployment benefit, industrial injury benefit, redundancy payments, graduated pensions or earnings-related benefits of various kinds.
In order to pay for the whole structure of social security benefits, with pensions taking the lion's share, the Conservative Government designed and introduced the

principle of earnings-related contributions to the basic cost. We proposed, as was right, that the self-employed should play their part in paying those earnings-related contributions. The proposals that we put forward, which were placed on the statute book in the Social Security Act 1973, were, as we believed, fair and sensible. They were new. They would have aroused some misunderstanding and anxiety even if they had come into force in that form, but they represented our best judgment of what was a fair and sensible way of distributing the burden of paying for improved benefits.
We proposed that the self-employed above a certain income limit should pay a contribution related to their earnings at the rate of 5 per cent. on a specified band. This Government have made a substantial swingeing increase in that percentage rate of contribution by raising it from 5 per cent. to 8 per cent. The important point for the purpose of this debate is that that contribution is not tax-deductible. No part of the 8 per cent. contribution payable by the self-employed can be offset against tax liability.
The effect on the figures now on the statute book is that every self-employed person with an income at or above £69 a week will be obliged to pay for this year a lump sum of £160 on top of his Schedule D liability—in other words, on top of his liability to pay income tax. As no tax relief is available, in order to raise the £160 each self-employed with an income above that figure will have to find an extra £238 out of taxed income simply to maintain the cash value of his income without making any allowance for inflation. That represents a significantly increased burden upon that which would have arisen under our proposals.
It is no wonder that the news of this impost has given rise to a blaze of anger throughout the country, and it is no wonder that the National Federation of Self-Employed sprang into existence. It was largely because of this proposal. I was acquainted early with the sense of anger felt by the self-employed because I had the privilege of speaking at the inaugural meeting of the NFSE in Manchester on 6th October last year.
This burden, against which we are now complaining and about which we propose some relief if the Committee accepts our


amendments, will fall upon everyone who works on his own account and earns more than a modest weekly sum in this great and diverse army of self-employed people—from barbers to bookbinders, from shopkeepers to solicitors, from doctors to dentists, from writers to window cleaners, from pharmacists to farmers. Incidentally, all these people, who have effectively been excluded from the negotiation of the social contract, have had no powerful union to represent them during the last two or three difficult years.
The self-employed notice a sharp contrast between the burdens that they will have to bear and the burdens which will fall on employed people who, for the most part, are represented by parties to the social contract. The contributions of most employed people during the current year will in many cases have gone down. However, for the self-employed they will almost always have gone up sharply. If we compare the position of an employed person and a self-employed person earning £60 a week, the liability of the employed person will have increased by 6·8 per cent. and for the self-employed person it will have gone up by 138·7 per cent.—about 20 times as much.
Therefore, the self-employed, rightly, feel themselves to have been heavily penalised and regard the change, as it is now taking place, as grossly unfair. It is for that reason that the Conservative Party in Parliament and outside has opposed and challenged the changes proposed by the Government at every stage. On four separate occasions we have challenged in Parliament the proposals, and sought to defeat them. On at least one occasion in another place we have mounted a similar challenge, and in the other place the challenge was indeed, as the whole Committee will remember, successful, because it secured the support not just of the Conservative Opposition and of Members of other parties, but of Members of the Labour Party, including such distinguished spokesmen as Lord George-Brown and Lord Houghton. Baroness Burton described the changes then being made as an attack on a section of the community that was unable to fight back.
However, the Government, notwithstanding their defeat at the hands of their own supporters, among others, in another place, came back to this House adamant

in their determination, and used their majority on 11th December last year to reverse the decision and to restore the impost that they were seeking to impose.
I wish to make it clear that we are not seeking special treatment for the self-employed. We are asking only that they should be given a fair deal. It is to that that this amendment is directed.
The Committee will remember that until 1965 contributions by the self-employed as well as by employed people were tax-deductible. In 1965 under the last Labour administration that position was changed. The employer's contribution remained tax-deductible, but the employee's contribution and the self-employed person's contribution ceased to be deductible from income tax liability. That represented a substantial change to the disadvantage of the self-employed compared with an alternative—an employer employing people directly. If we assume a tax rate of, for the sake of argument, 50 per cent., the position is that the employer's contribution in respect of a person whom he employs at a figure of 7½ per cent. is reduced to 3¾. per cent.; but the self-employed have to find the whole of their 8 per cent. contribution out of their taxed income.
Many self-employed people have to bear a dual burden because they are themselves employers. They pay an employer's contribution in respect of their own employees, and they pay their own self-employed contribution. It is particularly galling for people in that position to see that one is deductible from tax liability and the other is not.
The feature about which we complain has, we would contend, an important and unfair effect upon the position of those who are self-employed. It was discussed by the hon. Member for Islington, South and Finsbury (Mr. Cunningham) in the Standing Committee on the Social Security Amendment Bill on 19th November last year. The hon. Gentleman put the example of a case where national insurance contributions go up by £1 in a situation where tax is deductible at the rate of 50 per cent. He compared the position of an employer-employee establishment with that of a self-employed establishment. He spelt it out—and I am grateful to him for his example—as follows.
If the price of the service or goods being sold by those two establishments is raised to take account of the £1 increase in national insurance liability, in the case of the employer-employee establishment the tax-deductible costs go up from £100 to £101 and the prices go up from £110 to £111, so that the taxable profits remain the same at £10 and the post-tax profit remains the same at £5. However, in the self-employed establishment the tax-deductible costs remain at £100 because the extra £1 national insurance contribution cannot be counted as tax deductible. Even if prices are raised by £ 1 to £111 to offset the increased contribution, the taxable profit goes up to £11. If we take away tax at 50 per cent., the post-tax profit is £5·50; if we deduct from that the national insurance contribution, the net post-tax profit is £4·50 rather than £5.
It is clear from that example that the self-employed establishment can cope with the additional liability of an increase in National Insurance contribution only by raising its prices by £2 instead of by £1. As the hon. Member for Islington, South and Finsbury pointed out, this poses a severe competitive disadvantage for the self-employed and is grossly unfair.
Our amendments—and it is Amendment No. 69 which is in the most appropriate form—would have the following effect to meet that situation. They would give the self-employed person tax relief on a portion of his contribution, a portion calculated by the fraction of 8·5/14 of the total contributions payable by the self-employed person. There is no need to set any limit to the relief because that is set by the limits of liability to contribute under the Social Security Act. But the amendments, if accepted, would have the effect of restoring broad and simple justice to the position.
This proposal should commend itself to the entire Committee, indeed to anyone with common sense and sensibility in his approach to this problem.
During the Report stage of the Social Security Amendment Bill the hon. Member for Islington, South and Finsbury said that the first argument advanced in that debate:
…with which I agree completely, is that the self-employed are disadvantaged by comparison with the employed person in that they do not receive tax relief in respect of any part

of their contribution. I have said before, I am prepared to say again, and I am ready to vote accordingly, that that should be corrected. However, it cannot be corrected in this Bill.…But at some time it should be corrected."—[Official Report, 11th December 1974; Vol. 883, c. 662.]
The opportunity presents itself today. I look for his support and for the support of others of his hon. Friends, because the self-employed are as significant and as vital figures in their constituencies as they are in our own.

Mr. Nicholas Winterton: Although I entirely agree with the excellent arguments which my right hon. and learned Friend has produced to the Committee, would he direct his argument, before he completes moving the amendment, to the position of the self-employed who work alone? When they fall ill or fall on hard times their income drops to nil, or considerably. They are not entitled to unemployment benefit. Surely these factors should feature strongly in the argument which my right hon. and learned Friend is putting forward.

Sir G. Howe: I am grateful to my hon. Friend. During the opening part of my speech I pointed out that the self-employed do not receive unemployment benefit, nor do they receive earnings-related sickness benefit. That is one of the reasons why they feel so unfairly treated by the present provisions. It is only right to point out that the rate of contribution which they pay is adjusted to a significant extent to take account of that.
The point to which I am addressing myself is the point made by the hon. Member for Islington, South and Finsbury; namely, that the contributions of the self-employed are not tax-deductible in the same way as the contributions of the employed are. We in the Conservative Party do not intend to allow this issue to rest. We have established, as my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) announced on 19th May, a watchdog group to guard the interests of the self-employed. That group is under the chairmanship of my hon. Friend the Member for Somerset, North (Mr. Dean), and it will have as one of its main tasks the examination of the ways in which the present burden of national insurance contributions on the self-employed can be reduced.
We gave a pledge in our manifesto at the last General Election that we would take steps to remedy the present injustice. My hon. Friend the Member for Sutton Coldfield, in a speech to the National Federation of Self-Employed in March of this year, said that
A new Conservative Government would not be content to see the provisions of the Labour Government's Act remaining on the statute book. We will take steps to ensure that the burden of improved pensions is fairly shared. Above all we will end the undoubted discrimination against the self-employed.
I am happy to renew that pledge now. I hope that the Committee will take this opportunity of doing at least something to fulfil it by supporting the amendment.

4 p.m.

Mr. George Cunningham: I am flattered, I suppose, to feel that my remarks in Committee and on Report on the Social Security Amendment Act have assisted the Opposition in doing the homework which until then they had so clearly failed to do on the relationship between tax deductibility of contributions to the National Insurance Fund and the proper level of contributions. It would be fair to say that until that point in the discussion on the Social Security Amendment Act last year the Opposition had not referred to this point of tax deductibility except by a few sentences on the Floor of the House and the Committee. What they have now done is to latch on to an aspect of the subject to which they previously gave very little attention.
I said previously that I certainly think it was a mistake in 1965 to remove tax deductibility for contributions to the National Insurance Fund, whether those be contributions of the self-employed or of anyone else. But, in fairness to the Government of the time, there was a quid pro quo provided in the form of a £20 increase in the personal allowance for all contributors, which at that time was, give or take a few pounds, a reasonable quid pro quo to provide for the loss of tax relief.
The argument, however, that such a fixed addition to the personal allowance is a suitable means of compensating for the absence of tax deductibility no longer applies, because the amount which people are contributing will now be not a fixed

amount but one varying very greatly according to earnings, and therefore, the tax relief ought similarly to vary according to earnings.
I would, therefore, welcome a reversion to our previous system, under which not only the employer's contribution but the employee's contribution and the self-employed contribution were all deductible for taxation purposes.
If that were as far as the argument needed to go, we could stop there and accept the point in principle, putting up against it only those arguments of practicability and administration, and the cost of administration, which quite naturally have to be advanced on these occasions. But there is another side to the argument, which the right hon. and learned Member for Surrey, East (Sir G. Howe) referred to only most obliquely and briefly in the closing minute or two of his remarks. The truth is that the self-employed contributor gets in return for his contribution benefits in excess of those for which he is paying. There is no one in the House of Commons who has looked into the matter who does not agree with that as a statement of fact.
People may decide that the self-employed are such a worthy group in the community and that their economic activities are of such value to the country that they ought to be subsidised in this manner or in some other. But let them come out frankly and say that what they are proposing is a subsidy and that what they want is that the self-employed should obtain their pension—because that is the main element in the outgoings of the National Insurance Fund—at something less than the cost it takes to provide.
It is commonly said that self-employed people are entitled to benefits which represent about 85 per cent. or 90 per cent. of the outgoings of the National Insurance Fund. I think that 85 per cent. is nearer the mark than is 90 per cent. Therefore, I shall take the figure of 85 per cent., in relation to unemployment benefit and the earnings related benefits. The one or two other little benefits to which the self-employed are not entitled constitute only, in each year, less than 15 per cent. of the outgoings of the fund.
Therefore, a self-employed contributor ought to pay into the fund or to have paid into the fund for him a contribution


which equals 85 per cent. of the contribution paid into the fund for and on behalf of an employee. We all know that the amount of money paid into the fund on behalf of an employee is a total of 14 per cent. of his earnings—5½ per cent. paid directly by himself and 8½ per cent. by his employer. As 85 per cent. of 14 per cent. is about 12 per cent., the proper contribution for the self-employed to make to the fund for the benefits to which they are entitled is therefore about 12 per cent.
Most self-employed people will be required to pay and are required to pay now under the legislation as it stands, 8 per cent. of their earnings. The only self-employed contributors who will pay more than that will be those with incomes of less than £1,600 a year. Here is a genuine absurdity. The self-employed people with the lowest incomes will be paying the highest percentage contribution.
This is not the forum in which to debate at length that anomaly or to correct it. I have suggested a way in which it could be corrected, quite easily—by treating the standard fixed payment of £2·41 as an advance upon a contribution to be expressed as 8 per cent. of total earnings. But that can be looked at in another quarter.

Mr. Nicholas Ridley: Does not the hon. Gentleman agree that another anomaly is that many people who have self-employed earnings from several sources, or who have employed earnings and self-employed earnings at the same time, will be asked to make interest-free loans to the Government, as well as in many cases exceeding the 8 per cent. which he has mentioned?

Mr. Cunningham: I do not think that I agree with that. I should have thought that self-employed people, both in respect of national insurance contributions and in respect of their tax, are normally in the opposite position, of having interest-free loans from the Government, in that they are required to account for what they owe only at a much later stage than are those who are subject to pay-as-you-earn, in respect of either taxation or National Insurance contributions.
Leaving aside those self-employed people with incomes of less than £1,600

a year, the situation, therefore, is that self-employed contributors will be paying 8 per cent. for benefits which, as far as can be actuarially calculated, ought to demand a contribution of 12 per cent.
If self-employed people were being asked to pay the proper full amount equivalent to the benefits to which they are entitled, certainly it would be right that they should receive relief in respect of that proportion of the 12 per cent. which was equivalent to the employer's contribution. But as long as we are giving them a one-third reduction in the gross amount which they are required to pay, it would be to add anomaly to anomaly to give at the same time the tax relief which is normally given to employers only.

Mr. A. J. Beith: The hon. Member himself argued when we were discussing the measure lying at the back of this—the social security legislation—that the absence of tax relief made it more equitable to advance the proposals which he wanted to support and, indeed, did ultimately support. When can we hope to get out of this dilemma that on any future occasion when we discuss the social security contributions, the remaining tax injustices and anomalies will cast a shadow over our discussions?

Mr. Cunningham: I take the point that the two must go together, and that on each occasion we would not go for the one until the other had been dealt with, and so on. I am perfectly prepared to vote for tax relief on the contributions if, at the same time, we are deciding, but not necessarily executing, a change in the gross amount of the contributions. It would be normal for a Government announcing an intention in respect of one of those changes to announce an intention in respect of the other. I do not think we are in practice faced with a practical difficulty there. The two go together, and if the Opposition are prepared to say that they accept the case that the self-employed people ought to pay the full actuarial gross contribution, I am sure the Government would say that on that basis they would be perfectly happy to give the proper degree of tax relief. But the two must either go together or not at all.
There is only one qualification that I make to this. There are several other


respects in which the actuarial calculation of what the self-employed draw out of the fund would produce a different figure from the calculation in respect of what employed people draw out of the fund. Once again, I do not know why I should do the Opposition's job for them. I have suggested to them avenues which they ought to explore. The self-employed lobby, which argues a lot but does not go into the facts very much, ought to explore them too.
It is unassailable that self-employed people retire later than employed people. I have a figure from the Department of Health and Social Security on this. Speaking from memory, I think it showed an average deferment of retirement of about a year and a half longer in the case of self-employed people than in the case of employees. That is a very important consideration. If the self-employed are drawing their pensions for a year and a half less of their pensionable age than are employees, that is a perfectly respectable basis for making an adjustment to the contribution which would otherwise be due from the self-employed, and there may be other respects in which one could justify a lower contribution. But, whatever it turned out to be, it would not be 8 per cent. It would be between 8 and 12 per cent. When we have done all that, and worked out what is the proper gross contribution for self-employed people to make to this fund, that will be the time, I suggest, at which to correct this partner anomaly of the absence of tax relief.
Finally, both these forms of relief are thrown upon the shoulders of employees. Because the self-employed do not pay the gross contribution which they ought to pay, the contribution which falls upon employees and their employers has to be that fractional amount higher. It is very small but it is notionally there. Similarly, if we were to reduce the taxation burden of self-employed contributors, that amount of taxation would be thrown on the shoulders of employees, and so at the same time, we would be duplicating the gross subsidy from employees to the self-employed which we already have, and that is not a duplication of anomaly for which I am prepared to vote.

4.15 p.m.

Mr. Charles Fletcher-Cooke: The hon. Member for Islington, South

and Finsbury (Mr. Cunningham), in a fluent and knowledgeable speech, could be faulted, I think, on only two matters. First of all, I do not think he got the force of the intervention of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) who put to him that the self-employed person, who in future will pay two stamps a week—because he is both employed and selfemployed—will thereby be giving an interest-free loan to the fund, because he does not get back his contributions as an employee for a considerable amount of time. But that is rather on the periphery of the argument.
It seemed to me that his chief point came at the end of his excellent contribution. This 12 per cent. figure, which he adopts as being the figure that the self-employed should pay if they are to contribute the actuarial sum necessary for the benefits they receive, is a highly notional figure, founded on some very dubious calculations, and in particular upon the two matters that he mentioned, namely, that the benefits they receive are, even within those categories of benefits that they do receive, much less than those of the employee. This is owing very largely to the fact that they have to work harder and longer, and in sickness as well as in health. It is this that lies at the depth of the grievance felt by the self-employed. It is not taken into account, when these very complicated calculations are made, that the one-man business or the one-man profession has to be kept going even though the man ought to be in bed; that the one-man business or the one-man profession is kept going well over the age of 65, even though the one man would like to retire.
In all these matters, it is clear that the self-employed make far fewer demands pro rata than the employed upon the expensive services of the State. I quite agree with the hon. Member that this has not been sufficiently quantified, but I do not see why the self-employed should be blamed for that. I do not see why the self-employed should be penalised for that. This is a difficult calculation and one which only the State, and those who command the services of the State's statistical machine, could possibly do.
Until that is done, it seems to me that the self-employed are entitled to the sort


of relief which these amendments suggest, because it is only in that rough way that they can get the justice which I think both he and I know they ought to have, one way or the other. I should like to see it done in the way that he suggested. It is too late to do it in this Finance Bill, but contributions, whether of the employed or the self-employed, ought to be tax deductible, as they always were up to 1965. The compensation for the loss of that right—it is not a privilege—namely, the £20 increase in the personal allowance is now derisory with the value of money as it is today. They have virtually no compensation at all, and until the whole system of tax allowance for contributions is corrected, I do not think we shall get this matter right.
I hope that the Minister of State, when he replies, will not again throw at us the argument, "You were going to do a bit of this—5 per cent. We have only increased the percentage. We have not in any way altered the principle. Therefore you are not entitled to criticise." There might have been some force in that argument in the previous times in which these encounters have taken place on the Social Security Bill, but as far as tax relief is concerned, it is surely by now an axiom of fiscal policy that one is entitled to use the tax weapon—God knows it is used frequently enough—to temper the wind to the shorn lamb, even at the expense of logic.
This is surely an occasion on which the Government should temper the wind to the shorn lamb. The self-employed are to accept an enormous increase in their burden. According to the hon. Member for Islington, South and Finsbury, it is not enough, but it is an enormous increase in burden over what they have previously borne. The Government should give them some relief by means of the fiscal weapon, since this is the only way in which it can be done in time to have any effect in the present circumstances. I do not know how much it would cost. I should be interested to hear. I cannot believe that it would cost all that much.
Unless the Chancellor of the Exchequer does something on these lines, there will be a great flight from the self-employed into the employed category. That may seem strange in a world in which we hear

that "the lump" is growing. But in more respectable areas than "the lump" the reverse process is in operation. I know from my own profession the number of one-man and two-man solicitors' firms which are breaking up, with applications being made by self-employed solicitors either for Government service or service in one of the big corporations. I know the number of small solicitors' firms going out of action almost every day of the week. I dare say it is the same in accounting firms and in other professions. I am sure that the same is true of small one-man self-employed businesses.
Their burden is both financial and psychological. We have been into all that before over the National Insurance Bill and over VAT. The self-employed person running a business by himself has to fill up all the forms himself. He spends his Sundays doing it. He has to go on and on when he is not feeling up to the mark, because he cannot afford to take time off.
All this in mercy the Government should do, and do now. Having done it for this year, they should undertake to look at the 1965 alteration in the law to see whether the best, most logical and most universal way of dealing with the problem would not be to revert to the system whereby all national insurance contributions were expenses for the purpose of the Act.

Mr. John Tomlinson: I hesitate to intervene in the debate. However, one or two points need to be made which have not been made so far.
I was surprised to hear the right hon. and learned Member for Surrey, East (Sir G. Howe) open the debate in such a way. Having spoken extensively at the tail end of last week and over the weekend about the virtues of moderation, he began his remarks in moving a very serious amendment with some extremely immoderate comments which did no credit to his public speeches in recent days.
Suddenly the right hon. and learned Gentleman is blaming this Government for heaping on the self-employed many of the problems which he listed. He tried to blame this Government, for example, for the rate burdens falling on the self-employed. However, it was the Government of whom he was a loyal and devoted


member who introduced local government reorganisation which was primarily responsible for many of these increased charges. The right hon. and learned Gentleman went on to list a number of other items which would increase the burden on the self-employed. However, he ought to recall the record of his own Government in inflicting many of these increased charges on the self-employed as a result of the actions which they took.
The right hon. and learned Gentleman spoke about the impact of inflation. If we want to argue about that, let us be clear about the beginning of the inflationary processes that we are experiencing today. It was when the money supply was allowed to get out of control under the previous administration. Before listing the burdens heaped upon the self-employed by this Government, the right hon. and learned Gentleman should go back to where it all began.
I come to the amendment. My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) outlined in his admirable speech the relationship between contribution and the benefit which the self-employed get. In this amendment, we are invited to revert to the tax allowance system when what this Government are pursuing is how best to promote equity of benefits rather than trying to give a tax offset advantage.
The Committee should be reminded that the Department of Health and Social Security has a working party which I understand is looking seriously at possible ways of promoting equity of benefit, especially in relation to earnings-related benefits. I believe that the Committee would be ill-advised at this stage to adopt an amendment of this kind when there is a serious attempt being made to remedy the anomaly of the lack of earnings-related benefit in areas of benefit. A serious attempt is being made to overcome the problem. We should be building in a further anomaly if we accepted the amendment when we might be able to resolve the original cause.
The Government are seeking to promote equity of benefit in a way that previous Governments never did. This attempt to give an earnings-related benefit to the self-employed is a more serious

approach to the problem than any previous Government have taken. I think that the Committee would be well advised to await the outcome of these investigations to see whether we can promote equity of benefit rather than perpetuate the anomalies by having tax advantages.
I hope that the Committee will reject the amendment on the basis that a serious attempt is being made to look at the discrimination which undoubtedly exists against many self-employed people who do not get equality of benefits from the contributions that they make.

Mr. J. Enoch Powell: I accept that there is a sound case which can be made to the effect that the percentage of the earnings-related contribution of a self-employed person has been fixed too high or, alternatively, as the hon. Member for Islington, South and Finsbury (Mr. Cunningham) suggested, fixed too low. I think that the exchanges so far have brought out the fact that at this stage the Committee lacks the full factual material in order to be able to decide where the point of equity in this matter lies.
However, that is not the subject that the amendment has brought before the Committee. If that were the question, we would not be and could not be dealing with it under this Bill. The right hon. and learned Member for Surrey, East (Sir G. Howe) tacitly admitted that he was proposing in a Finance Bill amendments designed to deal with a matter which could properly be dealt with only in a different kind of legislation, namely, that on social security. The result of attempting to do this in a Finance Bill is highly inequitable and illogical.
The amendment will have the effect of reducing the contribution of the self-employed contributor not by a flat rate percentage, which would be the natural way of remedying an inequity in the fixing of a percentage, but by a sum related to his top rate of taxation. If the amendment were accepted, the inequity, such as it is, imposed on the self-employed contributor would be minimised for the self-employed contributor with the largest income. But it would hardly be affected for the self-employed contributor with a small income. I cannot think that that is a proper approach to dealing with this problem.
I recognise, as the hon. Member for Islington, South and Finsbury reminded us, that in 1965 when these contributions ceased to be allowable against tax a quid pro quo was provided by the increase in the personal allowance. That was perfectly logical because the contributions had themselves previously been an allowance for tax. When they were then made taxable, it was the equitable counterpart of that to increase the personal allowance. But where as in this case we are arguing not that all the contributions should be allowable for tax but that one of the contributions has been fixed at too high a percentage, it is inevitably illogical to attempt to remedy that by the method of tax allowance.
4.30 p.m.
The hon. Member for Islington, South and Finsbury suggested that he had regretted the change which was made in 1965. On that matter I personally take the opposite point of view. Long ago the contributions under the National Insurance Scheme were regarded as genuine insurance contributions and the public were encouraged so to view them. But we have long moved out of that era. Indeed, the very principle of a graduated contribution is a repudiation of the insurance principle. Therefore, I believe that it is now generally recognised that the so-called insurance contributions are really taxes and that we should all do better—contributors and legislators—if we treated them as taxes, which is what they really are.

Mr. John Cope: Does the right hon. Gentleman not also think the present position inequitable whereby an employed person's contributions paid by the employer are allowable for tax but the employer's own contributions as a self-employed person are not? Even the part he pays for his own employees is allowable, at higher rates if he is in higher rates of tax or at lower rates if he is in lower rates, in the way that the right hon. Gentleman suggested.

Mr. Powell: Perhaps I may respond to the intervention but not immediately. If the hon. Gentleman will permit me, I shall complete the observation I was making, and then add a brief appendix to my speach dealing with his point.
The change made in 1965 was correct, because it recognised all these contributions as what they really are, namely, taxes and not individual insurance premiums. There is nothing more absurd than tax relief on a tax. It was therefore logical and right in my view that these contributions should have ceased to be allowable for tax.
I shall now respond to the intervention by the hon. Member for Gloucestershire, South (Mr. Cope). The point he raised was the same as that raised by the right hon. and learned Member for Surrey, East, namely, that there is an inequity between, on the one hand, the employer being able to claim as a deduction from his profits before tax the cost, including the compulsory contribution of employing a person to help him make those profits, and, on the other hand, the tax paid by an individual, whether an employee or a self-employed person, towards his own social service benefits. The fallacy lies in equating these two processes. One might as well argue from the fact that the cost of materials or any other factor of production is for an employer allowable against tax.
There is no analogy between the allowance for tax, in the calculation of profit, of the cost of employing an employee and the allowance for tax which is now proposed, which is an allowance of part of personal tax which we all pay. Therefore we come back, even via the intervention, to the point which I believe cannot be remedied in the course of the Bill, nor a fortiori by these amendments, namely, the question whether the ratio between the employee's tax and the self-employed's tax is justly fixed. Maybe it is not; but I believe that the inequity, whatever it may be, will be magnified, and magnified not only as between the two classes of contributors but as between individuals in the same class, if we proceed by way of the proposed amendment.

[Mr. OSCAR MURTON in the Chair.]

Mr. David Mitchell: The debate this afternoon can be reviewed only against the background of the general attack on the small business man which has characterised the activities of this Government throughout their period in office. If we take small business men


as a group and refer to them, as they have been referred to, as the seed corn of our future business activities, right at the heart—the very germ or beginning—are the self-employed.
People start as self-employed before they turn themselves into a small limited company. These people have been having a very difficult time, partly because of inflation. For example, a man running a village shop has to deal with inflation. He may have £2,000 or £4,000 worth of stock on his shelves. With inflation, in 12 months' time he will require another £400 or £800 worth of stock to carry the same number of lines. That is one example of the way in which inflation means that the self-employed or very small business man is under acute financial pressure at present. Therefore, it is particularly appalling to him to find that the burden of the increased cost of national insurance is unfairly shared between the various contributors.
We all knew, when the Government announced that they were to increase old-age pensions, that the increase would have to be paid for. I do not think that any of us would be right to argue with the proposition that it must be paid for. However, it should be paid for by all the contributors. The reason that so many people are angry about the present situation is that instead of sharing the burden fairly, the Government put an increased contribution on the employer, reduced the contribution for most employees, and at the same time put a savage increase on the contribution by the self-employed. There is a contrast in the way in which they have been handled. The savage increase was imposed on the self-employed at the same time as most employees have had a reduction in their contribution. There is an opportunity for the Government today to redress the wrong which was done in the National Insurance Act last year.
It has been said of every second marriage that it is
the triumph of hope over experience".
In debating this process again under the taxation element, rather than under the national insurance element, one is hoping, perhaps against experience, that the Government will give a fair deal to the self-employed.
I agree with my right hon. Friend the Member for Down, South (Mr. Powell) that this is not the ideal way in which to deal with this problem, but we do not live in an ideal world. We live in a world in which there is an opportunity for the Government to redress some of the damage they have done without the loss of face which would be involved if they were to go back and amend their own National Insurance Act, 1974.
The whole area of unfairness which is involved in this legislation is underlined by the fact that the money that the small business man or the self-employed man takes out of his business—the wages of his business—is also the return on his investments. In effect he is being asked to pay an extra 8 per cent. tax on the return on his investment as well as on his wages. The truth of the matter is that the self-employed draw less money than do the employed.
It may be true, as the hon. Member for Islington, South and Finsbury (Mr. Cunningham) mentioned in his interesting contribution during the Committee stage of the Social Security Bill, that statistically in terms of the proportion of benefit to which they are entitled, the self-employed ought not to have a deduction, but it is not the entitlement which is the important factor. The important factor is, how much do they draw and when do they utilise that entitlement? For example, the self-employed may be entitled to retire at the age of 65—for a woman at the age of 60—but how many do? How many continue working? We see the small business men, one after another, go on working until they die. They die in harness. That is true time after time of the small shop keeper, the man who sells wood, the man who does the newspaper round, the owner of the little sweet shop and so on. Many people engaged in small, generally service industries, make an important contribution to the economy, and time and time again they do not retire at normal retiring age.

Mr. George Cunningham: As I was the person who suggested that the Opposition might pick up this point, may I try to prevent them running too hard with it? Until April this year it was a tremendously valuable point. As from April, it is not quite so valuable, because those who defer their retirement will receive an increased pension, the increase


being nearer to that which is actuarially proper than has been given in the past. It is still not enough. It should be a 10 per cent. per annum increase, and it will be only 6 per cent. per annum, but the person who defers his retirement will get back a goad part of the value of that deferment in the form of an increased pension when he takes it.

Mr. Mitchell: I should not like the hon. Gentleman to think that he had inspired the notes for my speech, when the matter was drawn to my attention by a number of my constituents and not by the hon. Gentleman.
There are other factors besides that of retirement age. There is entitlement to sickness benefit. But the self-employed do not go sick. They go on working when they do not feel well, though they could easily go to their doctor, and probably would have done so as employees. The doctor might take a patient's temperature and say "You have 'flu. Go to bed and stay there for a week. Come back in a week's time, and if you are all right I shall send you back to work." But the self-employed go on working in those conditions. The small shopkeeper cannot suddenly say "I shall put up the shutters today because I am not feeling well." Customers rely on the small man for the milk round, the newspaper round, or whatever it may be. Many self-employed people cannot even take a holiday.
It is a question not of what proportion of the benefits the self-employed are actuarially entitled to but of what proportion they draw, and they draw substantially less. Therefore, their contributions should be less. We cannot make their contributions less under the Bill. What we can and should do is to save the Government's face on the national insurance side and make the contributions allowable against tax, which would give some saving to the self-employed.

Sir Geoffrey Howe: Perhaps I may take this opportunity to make clear the effective relief proposed in the amendment, because I may have misled the Committee with the figure I gave previously. The effective relief will be in relation to 8·5/14. I am not sure that I gave the correct fraction earlier. That is the effective relief in terms of the figures

under the 1974 Act. I hope that this intervention may enable the figure to be corrected if I inadvertently misled the Committee in my speech.

Mr. Mitchell: I am grateful to my right hon. and learned Friend for that clarification. I was going to suggest that the amendment, which he moved so ably, was very meagre, very temperate. I am constantly astonished by my right hon. and learned Friend's moderation, shown not only in speeches at the weekend but in his amendments. I should have much preferred to see the whole of the contribution of the self-employed allowed for tax. That would have restored the position. [Interruption.] An hon. Member speaking from a sedentary position refers to public expenditure. I find it fascinating that the Government are spending money to encourage the arts, the crafts and rural industries, but at the same time are clobbering them by taking the money hack in this way. It beats cockfighting to have this complete contradiction of Government operations in this area.

Mr. Tomlinson: Mr. Tomlinson rose—

4.45 p.m.

Mr. Mitchell: I have given way three times, and I think that I should now complete my speech. I am sure that the hon. Gentleman will be able to enter the debate later.
The self-employed, more than any other small businessmen, suffer from the overhead of Government interference, of having to do Government work for which they are not paid. If they had a trade union they would never have been saddled with their present situation, in which they have to work out PAYE and value added tax for the Government without payment. If they happen to be on two rates of VAT, they have a nightmare of work. They have to put in extra work over the weekends and often on Sundays to deal with this Government overhead.
In addition to all the other arguments, the Minister should take into account that if he accepts the amendment it will be one small step towards giving the self-employed a small contribution towards the high expenditure they incur in providing free services to his Department.

Mr. John Pardoe: It is a great good fortune that my support for this modest amendment has managed to withstand the storm of Conservative speeches so far. Otherwise, I would undoubtedly have changed my mind. Rarely have I heard poorer arguments for the extremely strong case that the self-employed probably, but not certainly, have. I say "probably" and not "certainly", because, as the right hon. Member for Down, South (Mr. Powell) said, no one in the Chamber has the foggiest idea whether their case is strong. The self-employed do not know either, because we do not have the actuarial figures, and we shall not have them for a long time, if ever.
We had a curious speech from the right hon. and learned Member for Surrey, East (Sir G. Howe), speaking from the Conservative Front Bench. I took it to be a past or future circular to the self-employed from Conservative Central Office. He announced—and it was a very odd thing to announce in a parliamentary debate—that he had set up a watchdog group of Conservative Members of Parliament to look after the interests of the self-employed. I have long been a member of a watchdog group looking after the interests of the self-employed—the whole Liberal Party. It is to encourage sectionalism to set up bodies of this sort, the right hon. and learned Gentleman announced. It does not further the aims of any group to announce the setting up of such a body in that way.
The whole matter of the self-employed insurance benefits is much more complicated than some politicians seem to think, though this was conceded by the right hon. Member for Down, South. It might be helpful to quote from an entirely non-political source, the notes in the British Tax Review, which says:
Much publicity has been given to the view that the earnings-related part of the contributions of the self-employed is a weapon aimed at their destruction by the present Government. It must be pointed out that the new scheme was introduced by the last Government. The present one increased the rates of contribution across the board. The change is one of degree, not principle.
That is the general point that should be made.
The problem is that we do not know whether the case being advanced on behalf of the self-employed is actuarially a

proper case, because the Government Actuary has admitted not only that he does not know quite how many millions of people are involved but that he does not know the cost of the benefits likely to accrue to them.
It is as well to be sure exactly what Parliament is asking the self employed to pay. It is not a general levy of 8 per cent. right across their earnings. It is 8 per cent. of the excess over £1,600, up to a maximum of £3,600. Therefore the most that could be paid is £160, or 4·44 per cent. That is not an astronomical amount at certain levels of income. There are substantial differences between the proportion that will be paid by one self-employed person and that paid by another.
I agree with the right hon. Member for Down, South on one point. I am delighted to have his support on this point, which I have argued several times in insurance debates in the House. We are in this mess because we stick to the ludicrous fiction of insurance. To the average man, and certainly to me, the word "insurance" implies that there is some relation between what is paid and what is received. In this case there is no relation. There is no actuarial relation to the benefits to which I would be entitled, let alone to what I would actually receive, if I were self-employed. We should abandon the insurance fiction and finance the whole national insurance expenditure out of taxation and make an honest man of the system. The right hon. Gentleman has indicated that we do not know what the cost of self-employed benefits are, and this simplification makes it possible, for instance, for the Federation of the Self-Employed to say in a circular,
This would have resulted in a fairer splitting of the total cost
Neither they nor we can say what "fair" means in that context, which is the problem that we face.
What do self-employed benefits cost and how much should be charged for them? No one is prepared to tell us. That is the whole point of the difficulty. Frankly, unless the Government Actuary can come to our aid—and I very much doubt whether he can—the only two ways out of the difficulty would seem to be either that the self-employed are to go on receiving benefit through a national insurance scheme or that we should have


a separate fund for the self-employed. At least we could then produce an annual accounting, making clear how much had been paid in and how much had gone out and, working on an annual-pay-as-you-go basis, we could say that "That is what it costs and this is what is paid in, so that there is nothing unfair about it". If we found that they had not paid enough, we should have to tell them that they had to pay more.
Alternatively, the self-employed could opt out of the national insurance scheme completely. They cannot do so under present legislation, but it is something that they might well start talking to the Government about. Since there is such great feeling among their members about the unfairness of what they are asked to pay, perhaps they should investigate the possibility of opting out of the scheme altogether and providing themselves with some kind of private insurance. However, in the light of experience of national insurance over the last 30 years or so they would probably get a raw deal, with the rate of inflation that I, for one, expect to see in the country, if they were to try to get from any private scheme the benefits they receive under the national insurance scheme.
I consider that this amendment, despite the endeavour of the Conservative Party to persuade me not to vote for it, is a very modest one which will go some way to meet the considerable grievance felt by the self-employed. For that reason support it.

Mr. Dafydd Wigley: This debate has reflected the dichotomy that there is on this question of national insurance, in that it has grown from an insurance scheme to something that is approaching an element of taxation. At the moment we are half way between the two processes, and it would be for the benefit of everyone, and certainly for Finance Bill discussions, if this trend were to continue and we were to see the development of either integrated taxation which is to look after raising revenue for these matters or at least a self-employment tax explicitly described as a tax and not as insurance.
In this debate so far we have talked very much about some technicalities. We have talked about an actuarial basis and

whether it should be 8 per cent. or 12 per cent. These are figures of which we have very little knowledge enabling us to judge whether one set or another is right. We have had arguments also whether one side of the House or the other were responsible for this tremendous increase in cost falling on the self-employed. It has been acknowledged by hon. Members opposite that that increase has taken place even though there may be argument over where it originated.
I should like to take a more pragmatic line. As it is acknowledged by both sides that there has been a tremendous rise in the cost falling on the self-employed, and since at this time, with ever-increasing unemployment, it must be in the general interest to stimulate as much self-employment as possible, in addition to stimulating as much employment for employees as possible, we should use every means at our disposal to encourage this result rather than the opposite.
At this time it may not be possible to take what would be the idealistically right step to help the self-employed in line with the practice of Finance Bills. I should have thought it necessary to look at two or three elements, one being the fact that a threshold of £1,600, set 12 or 18 months ago when the concept was developed, has changed in value today. I would have thought it necessary to think in terms of a reversion to something that was acceptable before 65, whether or not as part of an insurance or a taxation concept, on the pragmatic basis of helping these people in the only possible way at this time, through this Finance Bill.
I should like to take up a point made by the hon. and learned Member for Surrey, East (Sir G. Howe), who opened the debate, and to look at a point made by the right hon. Member for Down, South (Mr. Powell). A question arose whether we are discussing a value of 7·5 over 12 or 8·5 over 14. The right hon. Member for Down, South said that this would be worth much more for people at the higher end of the scale. As I read this amendment, reference is made to the increase being an amount equal to income tax at the standard rate, in which case would there not be a cut-off at the standard rate, so that whereas there may be


discrepancy for those from zero up to the standard rate, there is not an inequality beyond the standard rate.
I represent an area where the self-employed represent a very large part of the work force. Not only are they self-employed but very often they are self-employed and not also employing other persons. They suffer an additional work load falling on them by such matters as VAT, from whichever Government, and therefore they are the people suffering most. They are the people most likely at this time to be throwing everything in the air and asking, "Is it worth it?" at a time when unemployment in my area is running at 14 per cent. for men. If we are to overcome unemployment we need to create more jobs, whether for the self-employed or for employees. Therefore, on a purely pragmatic basis I urge the Committee to support this amendment as being at least a step towards encouraging people to become self-employed.

Mr. Peter Rees: This debate has uncovered a small part of a considerable problem—the problem of the self-employed in a period of rapid inflation, a period of increasing administrative complexity and a period of low profitability. It is a problem of which this Government seem sublimely unaware. This Government are very close—some would think too close—to the major unions but they are not yet receptive to the justified anxieties of the self-employed. It may well be that they will soon have to listen to the insistent, justified clamour of the Federation of the Self-Employed.
One of the complaints of the self-employed is the increase in their national insurance contribution. This amendment—and I congratulate my hon. and learned Friend the Member for Surrey, East (Sir G. Howe), who moved it—is designed to provide some relief, perhaps not an exact measure, perhaps not precisely symmetrical relief in this field. The right hon. Member for Down, South (Mr. Powell), with his remorseless logic, has attempted to assert that there is nothing more absurd than a tax relief for a tax.

Mr. Eric S. Heffer: On a point of order. I should like to apologise to the hon. and learned Member for Dover and Deal (Mr. Rees), but this

is a matter of great concern to the House and perhaps it will mean that you, Mr. Murton, will have to ask Mr. Speaker to come to the Chamber.
At this moment the Standing Committee on the Industry Bill is in a state of suspension because all the members of that Committee have walked out, on the basis that a statement was made in the House yesterday by the Secretary of State for Industry—and there is no personal criticism of him at all—that there would be a White Paper. We have demanded that there must be given to us, as members of the Committee, the fullest information of what is likely to be in that White Paper.
Hon. Members on this side of the Committee are particularly concerned because they know that we are working under a guillotine and that there are to be meetings outside this House with interested bodies such as the Confederation of British Industry and the Trades Union Congress, and that amendments may be put forward which may never reach the Floor of the House because they could be carried with the guillotine.
On that basis, we believe that this is a very serious inroad into the rights of hon. Members. On that basis we should like Mr. Speaker to be asked to come to the Chamber and to give us a ruling as to what the position is now. We should like to be told whether we are likely to get a statement so that we may proceed with the work of the Committee in the proper parliamentary way and consider all the amendments which have been tabled. This is a matter of the greatest importance and, Mr. Murton, we should like your assistance and guidance in dealing with it.

5.0 p.m.

The First Deputy Chairman: I have listened to what the hon. Gentleman said. His remarks are a matter not for the occupant of the Chair of this Committee but for the Chairman of the Standing Committee.

Mr. Heffer: Further to that point of order, Mr. Murton. Where else can we go? This is the Chamber of the House of Commons. It so happens that a Committee is meeting here at the moment. I am asking the Chairman of this Committee whether he is prepared to ask Mr. Speaker to come to the Chamber.

The First Deputy Chairman: I must make my ruling quite clear. The House is in Committee on the Finance Bill. The matter about which the hon. Gentleman complains should be dealt with by the Chair in the Standing Committee in question.

Mr. Heffer: Obviously we do not want to hold up the work of this Committee. We shall make our representations to Mr. Speaker direct.

Mr. Peter Rees: The intervention by the hon. Member for Liverpool, Walton (Mr. Heffer) demonstrates that industry as a whole is in as much confusion and distress as are the self-employed, but perhaps it would be out of order if I were to divert to that theme. Instead I shall try to confine my remarks to the plight of the self-employed.
Before that interruption I was saying that the right hon. Member for Down South, with his characteristic and remorseless logic, had endeavoured to assert that nothing was more absurd than tax relief for a tax. In the days when he was at the Treasury there was a relief for profits tax for companies against the income tax which those companies had to pay, but perhaps that situation was corrected during the right hon. Gentleman's tenure of office as Financial Secretary. There are respectable precedents for tax relief for a tax.
This is perhaps a slightly technical way of looking at the amendment. I remind the right hon. Gentleman that in personal taxation matters there is tax relief for premiums designed to secure retirement benefits for the self-employed, and I commend these to the Minister. I suggest that he has a further look at them since the limits are far too restrictively drawn in the light of current rates of inflation. The employee obtains part of his pension from contributions which are not derived from his taxed income, and this amendment is designed to put the self-employed on the same basis.
The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has with his usual assiduity led us into the field of actuarial calculations, and I shall not attempt to follow him there. In the whole field of social security benefits the

self-employed are possibly, if not certainly, in a worse position than those who are employed. There is not only the question of later retirement to which my hon. Friend the Member for Basingstoke (Mr. Mitchell) drew attention. There is the question of unemployment benefit when his business languishes, the question of when he chooses to enjoy the benefits of his business and the small but annoying anomaly that when he travels on the Continent he is not entitled to the same reciprocal benefits as is the employed person.
I have asked one of the Treasury Ministers for a breakdown of social security benefits as between the employed and the self-employed, and he has told me that they are not available. I suggest that it is time to take a deeper look at this matter, and as an interim measure of relief I hope that the Minister will be able to accept this modest amendment which is designed to achieve a rough measure of justice in a very difficult field.

The Minister of State, Treasury (Mr. Robert Sheldon): We have had an interesting debate, but it is a pity that such a high degree of immoderation should have been displayed in the assertions of many hon. Members on a question as important as this. The intention of the amendment, as I understand it, is that there should be tax relief for the self-employed for the part of their national insurance contributions which corresponds to the employer's share of an employee's total insurance contribution. There is in the amendment a technical defect with which we need not be concerned because what really matters is the substance of the amendment. I only mention the defect because it was drawn to my attention and it was felt right that the fact should go on the record.
Perhaps I should explain the relationship between the Government and the self-employed as I and the Treasury see it. I spent a large part of my previous existence before becoming a Minister as a self-employed person, and self-employment is undoubtedly one of the most valuable ways in which ideas, entrepreneurs and managers can get launched. Through it the determined and the individualist can find a particular niche which might not be available in ordinary employment. I am reminded of the


comment of the original Ferranti, the electronics engineer, who is reputed to have said, "If you are tall, good looking and clever all you need is luck". If, like him, "You are short and Italian you have to have 51 per cent.". We know full well the rôle of the individualist and how in so many cases they have been able to achieve success by their own independence. There are many examples of this. Of course, self-employment provides a road to the top as well as a way of life for a wide range of people and their abilities.
The Class 4 contributions of the self-employed are to be calculated on the basis of 8 per cent. of the assessed profits lying in the band between £1,600 and £3.600. The maximum extra contribution is, therefore, £160 which will be administered by the Inland Revenue with the tax on business profits.
I do not want to get involved in "yahboo" politics because that is not particularly helpful, but what we are proposing is not all that dissimilar from the Conservative scheme. That involved uprating for inflation, and we all know what that means. What we are proposing obviously derives front that scheme. The excess of antagonism by Conservative Members is, therefore, very hard to understand, except in terms of the political pressure which is being exerted from certain people within the Conservative Party. This seems to fit in with the setting up of the so-called "watchdog group". I am not sure what this group will watch over in this canine manner, but we look forward to seeing what it does in due course.
The 8 per cent. contribution has been described as a tax on the self-employed. Of course, we all know—and this has emerged during our debate—that it is no more of a tax than the 8½ per cent. tax on the employers and the 5½ per cent. tax on employees. The top and bottom of it all is that social security benefits, and in particular the retirement pension, have to be paid for. This is a very large element in the social security benefit. It has to be paid for largely by contributions, and the whole question that we should be concerning ourselves with, the question which was referred to by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), is what is a fair

and reasonable contribution for the self-employed. That is what we are talking about. There is no dogma, there are no politics: nothing but what is a fair and reasonable contribution for the self-employed to make.
If we had all the figures available the matter would be very simple. In the way that has been described, we would just consult these figures, see what the self-employed were getting and be able to provide a fairly precise relationship between contributions and benefits and make a much better approximation to relief. Unfortunately we cannot have these, and I shall come to the reasons for that in a moment.
These national insurance contributions have to be made by each individual to the State for the benefits he is going to receive. The self-employed get the benefits, they get very direct benefits, and it is very hard to see why they should get tax relief on the payments which they make before they derive those benefits. The employee also provides money for the benefits he receives, and it is very hard to see why he should be entitled to tax relief on the benefits he is going to get. As for the employer, he is in a rather different situation. He is not getting any benefits. By law, he has to pay part of these contributions in order to run his office; it is a business expense and it is wholly and exclusively paid for the running of his business, and is so allowable.
I view it with suspicion always when people ask for extra tax reliefs of any kind—and we shall be going over this in a number of ways in our further debates on the Finance Bill—because the cardinal fact about all tax relief is that those who earn the most gain the most. No matter what the system by which we are trying to operate a progressive method of providing taxation and benefits, this is not the best way in which to handle these matters. I understand the way in which the proposers of this amendment have tried to overcome that by talking about a standard rate, which does not, however, fit in with the unified tax system, but, nevertheless, the general principle remains.

Mr. Nigel Lawson: This general principle is a very important one. If the Minister is saying that no relief is possible because those who earn the most gain the most he is saying that there


is no possibility under a Government of which he is a member of there ever being a reduction in the rate of income tax.

Mr. Sheldon: That is not what I am saying at all. I would have thought it pretty obvious that if we try to give relief by means of income tax we give most to those who have most. There are certain situations in which that is what one intends to do, but there are other situations in which that is a byproduct of one's other intentions. I am only drawing the attention of the Committee to what I regard as a fairly obvious point.

Mr. Peter Rees: Does the hon. Gentleman's evident distaste for personal tax relief possibly lead him now to reconsider his position on negative income tax?

Mr. Sheldon: Negative income tax is something I should have been very happy to have seen had it dealt with the wide range of benefits that could be fitted in if another system were devised.

Mr. William Clark: Mr. William Clark (Croydon. South) rose—

Mr. Sheldon: Before the hon. Gentleman seeks to turn this debate into one on tax credits, let me say that the main argument against the tax credit system was the element that these were only a few of those benefits that could be paid under the tax credit system, which was the point I particularly did not like.

5.15 p.m.

Mr. William Clark: As Chairman of the Select Committee of which the hon. Gentleman was a distinguished member and put in a minority report, I would remind him that in that report he did not indicate that the reason he did not agree with the tax credit system was that it did not cover all the possible allowances. He will recall that in the main report, which the Conservative Government would have implemented had we won the General Election, the principal point was that this was a start and that eventually more and more of the benefits could be phased in. It is no good the Minister shaking his head. He knows this is perfectly true.

Mr. Sheldon: The hon. Gentleman knows perfectly well that we debated this furiously for six months. We did not con-

vince him and he did not convince us, and the argument continues, but I do not think it should continue in this particular forum.
If one looks at the actual benefits of the self-employed the thing that strikes one most forcefully is that to the ordinary employee only 70 per cent. of the benefits in terms of total payments comes through the retirement pension, while the proportion that goes to the self-employed is over three-quarters. More than three-quarters of the benefits going to the self-employed lie in the retirement pension, and this is the factor that makes it so very difficult to obtain any system that does not deal with this particular issue.

Mr. Pardoe: In order that the Committee may not be misled could the hon. Gentleman clarify his meaning? He is talking about nearly 75 per cent. of the benefits going to the self-employed. I think he means 75 per cent. of what the self-employed would be entitled to if they were to claim it, not the cost of the benefits the self-employed actually receive, because he does not know what that is.

Mr. Sheldon: The hon. Gentleman is obviously right, but this three-quarters of the benefits to which the self-employed are entitled actually consists of the retirement pension.
I now come to the point made repeatedly by my hon. Friend the Member for Islington, South and Finsbury in a very fine speech on the difficulty of getting the figures relating to the self-employed in isolation. It is going to be very difficult ever to overcome this inherent difficulty, which lies in the fact that, despite the common assumption that the self-employed are self-employed all their lives, in fact very many of them start life not self-employed and later become self-employed. There are relatively few, who from the moment they leave school until the day of their retirement, are self-employed. It is going to be extraordinarily difficult to obtain the actuarial figures because of this inherent complication.
Having said that, and having noted the argument used by my hon. Friend the Member for Islington, South and Finsbury about the factor of early retirement and the importance of that because of the changes in the scheme, I would say that the benefits to which they are


entitled are about 90 per cent. of those which the employees obtain. If one multiplies the 90 per cent. by the 14 per cent. one comes to the 12½ per cent. or 12 per cent. that has been mentioned. This is really what we are talking about: what should be the relationship between the national insurance contributions of the employee and that of the self-employed?
A week or two ago I was in the constituency of the hon. Member for St. Ives (Mr. Nott) and I noticed one or two window stickers for the self-employed. One I saw was in a shop very similar to that of a chain store a few doors down. One was a multiple shop and one looked to me as if it was owned by a self-employed person. I tried to compare the two shops. They both had three or four people in them. In one there was a manager; in the other there was somebody who seemed to me to be a self-employed person. In the case of the manager, he would be paying 5½ per cent. of his salary and his employer would be paying 8½ per cent. making 14 per cent. The self-employed person would be paying 8 per cent. The charge on the manager would be about 10 per cent., taking into account corporation tax at 52 per cent.
The question we have to ask ourselves is whether that 8 per cent. should, as a result of the amendment, be reduced to 5·2 per cent. Is that the right relationship? I do not believe that it is, bearing in mind the benefits available for the self-employed person.
My right hon. Friend the Secretary of State for Social Services has announced an inquiry into national insurance and the self-employed. It is hoped that an interim report will be available by about the autumn. Meanwhile, the present contribution rates are believed to be reasonable and fair, and I ask the Committee to reject the amendment.

Mr. John Nott: When I reread the excellent debate on the Social Security Amendment Bill on 26th November 1974 which dealt with the general subject of contributions by the self-employed, I was struck by a quotation which was made by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith). He

reminded us that it was said of Sir Robert Peel in the matter of the Corn Laws:
He has convinced others. How comes it that he has failed to convince himself?"—[Official Report, 26th November, 1974; Vol. 882, c. 328.]
When I re-read that quotation I thought of a more topical example—the Secretary of State for Industry. How was it that he could so convince the country that we should remain a member of the Community when he so signally failed to convince himself?
Perhaps the quotation more aptly applies to what was said by the hon. Member for Islington, South and Finsbury (Mr. Cunningham). When the Social Security Amendment Bill was proceeding through the House he convinced many of his hon. Friends—and he may have convinced one or two of my hon. Friends—that the way to handle the discrepancy between contributions and benefits was by means of tax relief. He argued in Committee against reducing the percentage to 5 per cent. Now he says that he would be prepared to go back to the pre-1965 position, but he does not like what we propose in our amendment. The words he used on 11th December 1974 cannot bear that interpretation. He said:
the self-employed are disadvantaged by comparison with the employed person in that they do not receive tax relief in respect of any part of their contribution."—[OFFICIAL REPORT, 11th December 1974; Vol. 882, c. 662.]
He was making a clear distinction between the employed person and the self-employed person, and pre-1965 the relief was surely available for all contributions.
Again, when the Bill came back to the House—which it did because Lord George-Brown and many other senior and highly respected members of the Labour Party had agreed that the scale of the increase for the self-employed was entirely outside the laws of equity—the hon. Member for Islington, South and Finsbury said:
Therefore, the self-employed person should not get tax relief on the notional equivalent of the employee's contribution but should get tax relief on the notional equivalent of the employer's contribution.—[OFFICIAL REPORT, 26th November 1974; Vol. 882, c. 326.]

Mr, George Cunningham: If he is paying it.

Mr. Nott: We all appreciate the difficulty of the hon. Gentleman's position, but the interpretation which one puts on those remarks can only allow us to feel that he meant all along that he was happy to go back to pre-1965 but not to go along with what we propose today.

Mr. Cunningham: I am touched by those generous references to my remarks, but I should like to get this perfectly straight. I made clear all along that what I wanted was for the gross amount of the self-employed contribution to be raised above 8 per cent., to 12 per cent. or thereabouts, and, as part of that, for tax relief to be available on that part of the 12 per cent. which represented the equivalent of the employer's contribution, and that no one of those things should be done without the other being done.

Mr. Nott: As I was not a member of the Committee I must confess that I have not read every word the hon. Gentleman said in Committee and I would not wish to claim that in these remarks he was saying something less than the whole of what he wanted to say. If he were coupling his remarks always with the point that he would be prepared to see this tax relief only if it were combined with a contribution higher than 8 per cent., I accept what he says, but on rereading those remarks I cannot see that he coupled them with the suggestion that the contribution should go higher.
The right hon. Member for Down, South (Mr. Powell) made an interesting intervention, but I am not quite sure that he had the amendment right. If he says that a national insurance contribution is a tax, I wholly agree with him. The new national insurance contribution is in the nature of a progressive tax because it is earnings related. Any tax relief in a progressive tax system will obviously benefit the better-off rather than the worse-off. For a person receiving tax relief, the more tax he pays the more benefit he will receive in a progressive system. But our amendment, contrary to what the right hon. Gentleman implies, is not to give relief at the higher rates of tax, although the right hon. Gentleman said that it would give relief at the higher marginal rate. The proposal is that there should be an amendment purely of the basic rate of 35 per cent.

just as the employer's contribution would be at the basic rate of corporation tax of 52 per cent.
We are talking here primarily about sole traders and Schedule D taxpayers. If we were to give any relief it could only be relief based on Schedule D. I have to repeat what my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said. There are many tax reliefs on the statute book, and if we are seeking to help the self-employed this is the only way we can do so. As he said—and I put this rhetorically because these are complicated matters—it is surely right that the employee benefits f the employer's contribution which is relieved from tax. Therefore, it is not unreasonable that we should put forward tax relief of the type proposed in the amendment.
The hon. Member for Cornwall, North (Mr. Pardoe) on every debate on every amendment casts unjustified aspersions upon the attitude of every party but his own. His curious habit, after casting those aspersions about the Labour Party or the Conservative Party, is to follow in almost the next sentence by appealing for an end to sectionalism. The two go almost side by side. I cannot remember—and I am trying to be generous to the hon. Gentleman who is not quite a neighbour but nearly so—any idea, any constructive project, any attempt at reconciling interests which has ever taken place in the House of Commons which the hon. Gentleman does not claim in the course of his speech to stem originally from himself.

Mr. Pardoe: Absolutely right.

Mr. Nott: Shall I say that the hon. Gentleman's modesty is not always prominent in our debates. If any agreement is possible amongst the parties in the House of Commons, I am afraid that the hon. Gentleman is always in the vanguard to destroy it. Today he ended his remarks by saying, "In spite of what the Conservative Party has done to persuade me not to vote for the amendment, I shall do so." That is precisely the attitude that the hon. Gentleman adopts in all our debates.
5.30 p.m.
In the Minister's reply we have seen the Labour Party clothed in its freshly


laundered garb of seeking to be reasonable and of seeking to reconcile interests. It was pleasant to hear the Minister of State say certain things. However, I fear that by the end of the week we shall need a bit of relaundering. Anyhow, the Minister of State expressed his point of view in moderate language.
This would not be an expensive amendment. I think that it must seem overwhelmingly fair to all responsible men and not just to Lord George-Brown in another place and to other members of the Labour Party such as Baroness Burton and Lord Houghton, who was until recently the Chairman of the Parliamentary Labour Party. If it seems fair to them, why does it seem so unfair to Labour Members? After all, Lord Houghton was a repected Member of Parliament.
One argument that has been raised this afternoon has been about the relative size of the contributions to the National Insurance Fund. As my hon. and learned friend the Member for Darwen (Mr. Fletcher-Cooke) said, an assessment of true costs and benefits—and I emphasise the word "true"—could not ignore the fact that the self-employed generally make fewer demands on the State than the employed. The self-employed make no contribution for sickness and they receive no benefit from the fund in that respect, but their services are available to the community in sickness and in health.

Mr. George Cunningham: The self-employed get sickness benefit.

Mr. Nott: I apologise, I had in mind a number of other benefits to which references was made by hon. and learned Friends. I should have been more precise and have referred to earnings related sickness benefit.
My hon. Friend the Member for Basingstoke (Mr. Mitchell) raised some wider questions. I was glad to hear the Minister of State support the argument that our society would be poorer, duller and a less happy place without our small firms and farms. He was kind enough to say that he had spent some time in my constituency a short while ago. He must realise that the major proportion of the high level of unemployment in that part of the world, and in many other

areas, is attributable directly to the redundancies occurring among people who run their own small firms.
I do not wish to go into the whole question of rates, capital transfer tax and everything else, but the community must understand how it is that a self-employed man is full of fury at the fact that he is having to pay an extra £238 this year in pre-tax terms for no extra benefits. It must appear to the self-employed man that he is being greatly exploited. If the hon. Member for Islington, South and Finsbury were asked suddenly in one year to give up the additional amount of £238 for no extra benefit, and if he had not spent all his days and nights ploughing his way through actuarial reports on these matters, which I understand he does, I am sure that he would be very angry.
We must be seriously concerned about the difficulties which small firms are facing. Their difficulties are severe and it is against that background that the Conservative Party feels strongly about the amendment. The big battalions of the CBI and the TUC will have to learn that it is not primarily big business which is the ultimate bastion of liberty and freedom but the small man. The small man may be working in a large firm, but it will not be the large bureaucracies, whether in business or in trade associations, that will maintain the real freedoms and liberties of this country in the last resort. Those elements will be maintained by individuals and by small business men.
The Minister of State said that those who earn the most gain the most. He said that as if it were some truism that had never occurred to anyone before. Is he suggesting that those who earn the most should gain the least? The people who earn the most clearly earn it by their own efforts. It is also clear that those who earn the most pay the most. It follows that those who pay the most will receive the most by means of tax relief. That must be the case.

Mr. George Cunningham: No.

Mr. Nott: The justification for the amendment is the unfairness that we be-lieve prevails as regards the proportion of benefit to contribution. However, I rest our case with the amendment and


with the tax relief that we are seeking, given the size and the suddenness of the increase which has arisen. Let me repeat the situation once again. I refer to the facts which my right hon. and learned Friend the Member for Surrey, East has mentioned. The increases are of such a size that it is impossible for the self-employed not to imagine that the Government are deliberately out to discriminate against them. As regards the £40-a-week man, his contribution has increased by 58 per cent. from February 1974 to April 1975, whereas the £40-a-week man who is employed has seen his contribution fall by 8 per cent. The contribution of the £50-a-week man who is employed has increased by nearly 5 per cent. whereas the self-employed man earning that amount has seen his contribution increased by 98 per cent. Finally, the contribution of the £60-a-week employee has increased by 6·8 per cent. whereas the self-employed man's contribution has increased by 138·7 per cent. It is the scale and the suddeness of the increase which has no foundation in equity.
In the amendment we are seeking not to change the contributions to the National Insurance Fund but to go some

little way to put back the size of the increase which has been heaped upon the self-employed since the Labour Government came to office. This is no small matter concerning merely one or two people. If I take the Bolton Committee's definition of small firms—that definition is as good as any other—it seems that there are anything up to 1¼ million small family-owned firm in this country, without including agriculture. They employ approximately 6 million people and they are responsible for 20 per cent. of our gross national product.

In the new environment in which we have all been living since last Thursday I believe that more consideration needs to be given to equity amongst society generally. That does not mean that the self-employed man earning £50 a week should pay a contribution that has nearly doubled in size. I do not think that that can be fair.

I ask my hon. Friends to divide on this amendment. I am sorry that the Government will not accept it.

Question put, That the amendment be made:—

The Committee divided: Ayes 199, Noes 224.

Division No. 222.]
AYES
[5.40 p.m.


Adley, Robert
Critchley, Julian
Havers, Sir Michael


Arnold, Tom
Crowder, F. P.
Hawkins, Paul


Atkins, Rt Hon H. (Spelthorne)
Dean, Paul (N Somerset)
Hayhoe, Barney


Awdry, Daniel
Dodsworth, Geoffrey
Henderson, Douglas


Bain, Mrs Margaret
Durant, Tony
Hicks, Robert


Beith, A. J.
Dykes, Hugh
Holland, Philip


Bell, Ronald
Edwards, Nicholas (Pembroke)
Hooson, Emlyn


Benyon, W. L.
Evans, Gwynfor (Carmarthen)
Hordern, Peter


Berry, Hon Anthony
Ewing, Mrs Winifred (Moray)
Howe, Rt Hon Sir Geoffrey


Biffen, John
Eyre, Reginald
Howell, David (Guildford)


Biggs-Davison, John
Fairbairn, Nicholas
Howell, Ralph (North Norfolk)


Blaker, Peter
Fell, Anthony
Hunt, John


Boscawen, Hon Robert
Fletcher, Alex (Edinburgh N)
Hutchison, Michael Clark


Bowden, A. (Brighton, Kemptown)
Fletcher-Cooke, Charles
Irvine, Bryant Godman (Rye)


Braine, Sir Bernard
Fookes, Miss Janet
James, David


Brittan, Leon
Fowler, Norman (Sutton C'f'd)
Jenkin, Rt Hon P (Wanst'd&amp;W'df'd)


Brotherton, Michael
Fry, Peter
Kaberry, Sir Donald


Brown, Sir Edward (Bath)
Gardiner, George (Reigate)
Kershaw, Anthony


Bryan, Sir Paul
Glyn, Dr Alan
Kimball, Marcus


Buchanan-Smith, Alick
Goodhart, Philip
King, Tom (Bridgwater)


Budgen, Nick
Goodhew, Victor
Kitson, Sir Timothy


Bulmer, Esmond
Goodlad, Alastair
Knight, Mrs Jill


Burden, F. A.
Gow, Ian (Eastbourne)
Knox, David


Butler, Adam (Bosworth)
Gower, Sir Raymond (Barry)
Lamont, Norman


Carlisle, Mark
Grant, Anthony (Harrow C)
Langford-Holt, Sir John


Chalker, Mrs Lynda
Gray, Hamish
Latham, Michael (Melton)


Channon, Paul
Grieve, Percy
Lawrence, Ivan


Clark, William (Croydon S)
Griffiths, Eldon
Lawson, Nigel


Clarke, Kenneth (Rushcliffe)
Grimond, Rt Hon J.
Lloyd, Ian


Clegg, Walter
Grylls, Michael
Loveridge, John


Cockcroft, John
Hall-Davis, A. G. F.
Luce, Richard


Cooke, Robert (Bristol W)
Hamilton, Michael (Salisbury)
MacCormick, Iain


Cope, John
Hannam, John
McCrindle, Robert


Cordle, John H.
Harrison, Col Sir Harwood (Eye)
Macfarlane, Neil


Costain, A. P.
Harvie Anderson, Rt Hon Miss
MacGregor, John


Crawford, Douglas
Hastings, Stephen
McNair-Wilson, M. (Newbury)




Madel, David
Penhaligon, David
Stewart, Ian (Hitchin)


Marshall, Michael (Arundel)
Percival, Ian
Stokes, John


Mates, Michael
Pink, R. Bonner
Stradling, Thomas, J.


Mather, Carol
Rathbone, Tim
Tapsell, Peter


Maudling, Rt Hon Reginald
Rees, Peter (Dover &amp; Deal)
Taylor, R. (Croydon NW)


Maxwell-Hyslop, Robin
Rees-Davies, W. R.
Taylor, Teddy (Cathcart)


Mayhew, Patrick
Renton, Rt Hon Sir D. (Hunts)
Tebbit, Norman


Meyer, Sir Anthony
Rhys Williams, Sir Brandon
Thatcher, Rt Hon Margaret


Miller, Hal (Bromsgrove)
Ridley, Hon Nicholas
Thomas, Dafydd (Merioneth)


Mills, Peter
Rifkind, Malcolm
Thompson, George


Miscampbell, Norman
Roberts, Michael (Cardiff NW)
Townsend, Cyril D.


Mitchell, David (Basingstoke)
Roberts, Wyn (Conway)
Tugendhat, Christopher


Moate, Roger
Rodgers, Sir John (Sevenoaks)
Vaughan, Dr Gerard


Monro, Hector
Ross, Stephen (Isle of Wight)
Viggers, Peter


Moore, John (Croydon C)
Rossi, Hugh (Hornsey)
Wainwright, Richard (Colne V)


Morgan-Giles, Rear-Admiral
Sainsbury, Tim
Wakeham, John


Morrison, Charles (Devizes)
St. John-Stevas, Norman
Walker, Rt Hon P. (Worcester)


Morrison, Hon Peter (Chester)
Scott-Hopkins, James
Walker-Smith, Rt Hon Sir Derek


Mudd, David
Shaw, Giles (Pudsey)
Wall, Patrick


Neave, Airey
Shaw, Michael (Scarborough)
Watt, Hamish


Neubert, Michael
Shepherd, Colin
Weatherill, Bernard


Newton, Tony
Silvester, Fred
Welsh, Andrew


Normanton, Tom
Sims, Roger
Whitelaw, Rt Hon William


Nott, John
Sinclair, Sir George
Wiggin, Jerry


Onslow, Cranley
Skeet, T. H. H.
Wigley, Dafydd


Oppenheim, Mrs Sally
Smith, Cyril (Rochdale)
Wilson, Gordon (Dundee S)


Osborn, John
Speed, Keith
Winterton, Nicholas


Page, John (Harrow West)
Spicer, Michael (S Worcester)



Page, Rt Hon R. Graham (Crosby)
Sproat, Iain
TELLERS FOR THE AYES:


Pardoe, John
Stainton, Keith
Mr. Spencer le Marchant and


Parkinson, Cecil
Steel, David (Roxburgh)
Mr. Russell Fairgrieve


Pattie, Geoffrey
Stewart, Donald (Western Isles)





NOES


Allaun, Frank
de Freitas, Rt Hon Sir Geoffrey
Hunter, Adam


Anderson, Donald
Dell, Rt Hon Edmund
Irving, Rt Hon S. (Dartford)


Archer, Peter
Dempsey, James
Jackson, Colin (Brighouse)


Armstrong, Ernest
Doig, Peter
Jackson, Miss Margaret (Lincoln)


Ashton, Joe
Douglas-Mann, Bruce
Janner, Greville


Atkins, Ronald (Preston N)
Duffy, A. E. P.
Jay, Rt Hon Douglas


Atkinson, Norman
Dunlop, John
Jenkins, Hugh (Putney)


Bagier, Gordon A. T.
Dunnett, Jack
John, Brynmor


Barnett, Guy (Greenwich)
Dunwcody, Mrs Gwyneth
Johnson, James (Hull West)


Barnett, Rt Hon Joel (Heywood)
Eadie, Alex
Jones, Alec (Rhondda)


Bates, Alf
Edge, Geoff
Jones, Barry (East Flint)


Bidwell, Sydney
Edwards, Robert (Wolv SE)
Jones, Dan (Burnley)


Bishop, E. S.
Ellis, Tom (Wrexham)
Judd, Frank


Blenkinsop, Arthur
English, Michael
Kerr, Russell


Boardman, H.
Evans, Fred (Caerphilly)
Kilroy-Silk, Robert


Body, Richard
Evans, Ioan (Aberdare)
Lamborn, Harry


Booth, Albert
Evans, John (Newton)
Lamond, James


Bottomley, Rt Hon Arthur
Ewing, Harry (Stirling)
Lestor, Miss Joan (Eton &amp; Slough)


Bray, Dr Jeremy
Fernyhough, Rt Hon E.
Lewis, Arthur (Newham N)


Brown, Hugh D. (Provan)
Flannery, Martin
Lewis, Ron (Carlisle)


Brown, Robert C. (Newcastle W)
Fletcher, Ted (Darlington)
Lipton, Marcus


Buchan, Norman
Ford, Ben
Lomas, Kenneth


Butler, Mrs Joyce (Wood Green)
Forrester, John
Loyden, Eddie


Callaghan, Jim (Middleton &amp; P)
Fowler, Gerald (The Wrekin)
Lyons, Edward (Bradford W)


Campbell, Ian
Fraser, John (Lambeth, N'w'd)
McCusker, H.


Canavan, Dennis
Garrett, John (Norwich S)
McElhone, Frank


Carter-Jones, Lewis
George, Bruce
MacFarquhar, Roderick


Cartwright, John
Gilbert, Dr John
Mackenzie, Gregor


Clemitson, Ivor
Golding, John
Mackintosh, John P.


Cocks, Michael (Bristol S)
Gould, Bryan
McMillan, Tom (Glasgow C)


Cohen, Stanley
Gourlay, Harry
McNamara, Kevin


Coleman, Donald
Graham, Ted
Madden, Max


Cook, Robin F. (Edin C)
Grant, George (Morpeth)
Mahon, Simon


Corbett, Robin
Grocott, Bruce
Mallalieu, J. P. W.


Cox, Thomas (Tooting)
Hamilton, James (Bothwell)
Marks, Kenneth


Craigen, J. M. (Maryhill)
Hamilton, W. W. (Central Fife)
Marshall, Dr Edmund (Goole)


Crawshaw, Richard
Harper, Joseph
Marshall, Jim (Leicester S)


Cronin, John
Harrison, Walter (Wakefield)
Maynard, Miss Joan


Crosland, Rt Hon Anthony
Hatton, Frank
Meacher, Michael


Cryer, Bob
Hayman, Mrs Helene
Mellish, Rt Hon Robert


Cunningham, G. (Islington S)
Heffer, Eric S.
Mendelson, John


Cunningham, Dr J. (Whiteh)
Hooley, Frank
Millan, Bruce


Dalyell, Tam
Horam, John
Molyneaux, James


Davidson, Arthur
Hoyle, Doug (Nelson)
Morris, Alfred (Wythenshawe)


Davies, Bryan (Enfield N)
Huckfield, Les
Murray, Rt Hon Ronald King


Davies, Denzil (Llanelli)
Hughes, Rt Hon C. (Anglesey)
Newens, Stanley


Davies, Ifor (Gower)
Hughes, Mark (Durham)
Noble, Mike


Davis, Clinton (Hackney C)
Hughes, Robert (Aberdeen, N)
Oakes, Gordon


Deakins, Eric
Hughes, Roy (Newport)
Ogden, Eric




O'Halloran, Michael
Sandelson, Neville
Urwin, T. W.


O'Malley, Rt Hon Brian
Sedgemore, Brian
Wainwright, Edwin (Dearne V)


Orbach, Maurice
Selby, Harry
Walker, Harold (Doncaster)


Ovenden, John
Sheldon, Robert (Ashton-u-Lyne)
Walker, Terry (Kingswood)


Palmer, Arthur
Short, Rt Hon E. (Newcastle C)
Ward, Michael


Park, George
Silkin, Rt Hon John (Deptford)
Watkins, David


Parry, Robert
Silkin, Rt Hon S. C. (Dulwich)
Weitzman, David


Pavitt, Laurie
Silverman, Julius
Wellbeloved, James


Perry, Ernest
Skinner, Dennis
White, Frank R. (Bury)


Powell, Rt Hon J. Enoch
Small, William
White, James (Pollok)


Prescott, John
Smith, John (N Lanarkshire)
Whitehead, Phillip


Price, C. (Lewisham W)
Spearing, Nigel
Whitlock. William


Price, William (Rugby)
Spriggs, Leslie
Willey, Rt Hon Frederick


Richardson, Miss Jo
Stallard, A. W.
Williams, Alan (Swansea W)


Roberts, Albert (Normanton)
Stewart, Rt Hon M. (Fulham)
Williams, Alan Lee (Hornch'ch)


Roberts, Gwilym (Cannock)
Stoddart, David
Williams, Rt Hon Shirley (Hertford)


Robertson, John (Paisley)
Stott, Roger
Williams, W. T. (Warrington)


Roderick, Caerwyn
Strang, Gavin
Wilson, Alexander (Hamilton)


Rodgers, George (Chorley)
Summerskill, Hon Dr Shirley
Wilson, William (Coventry SE)


Rodgers, William (Stockton)
Taylor, Mrs Ann (Bolton W)
Wise, Mrs Audrey


Rooker, J. W.
Thomas, Jeffrey (Abertillery)
Woodall, Alec


Roper, John
Thomas, Ron (Bristol NW)
Woof, Robert


Rose, Paul B.
Tierney, Sydney
Wrigglesworth, Ian


Ross, Rt Hon W. (Kilmarnock)
Tomlinson, John



Ross, William (Londonderry)
Tomney, Frank
TELLERS FOR THE NOES:


Rowlands, Ted
Torney, Tom
Mr. James A. Dunn and


Ryman, John
Tuck, Raphael
Mr. John Ellis.

Question accordingly negatived.

Mr. Tony Newton: I beg to move Amendment No. 63, in page 19, line 3, at end insert:
'(2A) In section 16 of the Taxes Act (dependent relative) for the references to £100 there shall be substituted references to £140 and for the reference to £145 there shall be substituted a reference to £200.'.
In a sense this amendment is a follow-up to a number of amendments moved by myself and a number of my hon. Friends on 10th June 1974. It is also a follow-up to an amendment which I moved before the Recess, during previous discussions on the Finance Bill, and which was designed to help widows.
To my mind, at least, the group covered by this amendment—those, especially single women, looking after elderly dependent relatives—form a special case which deserves special consideration by the Committee.
It may be helpful if I remind the Committee of the background to this amendment and the discussions we had on similar matters last year. There are five additional special personal allowances. There is one for relatives taking charge of an unmarried person's younger brother or sister; there is the additional relief for widows and others in respect of children—we have been talking a great deal about that recently in connection with the problem of the single-parent family; there is the allowance for those helping to support dependent relatives, which is covered by this amendment; there is also the

daughter's services allowance, and another allowance for blind persons.
Last year some of us proposed a series of amendments, some of which were designed to create a more uniform level of these special personal allowances and others of which were designed to increase each of them individually in various ways and to various extents. Since then the pressure which we put on the with regard to the matter last year has paid off in some important respects. There have been two increases in the additional relief for widows and others, in respect of children, which apply to single-parent families—one in last year's Finance Bill and one in the present Bill. The present Bill proposes an increase in the allowance for blind persons.
It would be churlish of me not to recognise and welcome what has been achieved and proposed by Ministers in respect of these two important allowances, for which we pressed hard last year.
If the Minister of State is to reply to the debate he will take on the task which the Chief Secretary had last year. I therefore remind the Minister of State of what the Chief Secretary said last year about these allowances. Exactly one year ago today he resisted our proposals for a general increase in these allowances on the ground that the whole problem needed much more coherent consideration than we were able to give to it. On that occasion the Chief Secretary said:
It is right to say that the system of allowances is ramshackle. These so-called secondary allowances have grown up over the years and


there is a clear need to examine them."—[Official Report, 10th June 1974; Vol. 874, c. 1311.]
Later he referred to the whole system as being "rough justice". He developed his resistance to our proposals on the ground that because the system was ramshackle and provided rough justice he could not increase some of the allowances or iron out the obvious differences between them, and that it needed some much more carefully considered and prepared approach to the problem.
To be fair, under considerable pressure from both sides, the Chief Secretary modified that attitude later in the debate when he said that he would at least examine all these allowances during the consideration of the Bill, and especially the question of the additional personal allowances.
I always fall over backwards to be as fair as I can to the Chief Secretary. His reconsideration of the additional personal allowances for widows and others, including that for single-parent families, produced an amendment later in the consideration of the Bill. But we obtained nothing else. The other allowances were not adjusted.
On Report, on 17th July 1974, the grounds of resistance had changed. Clearly the objection to a piecemeal attack could no longer be advanced, because the Chief Secretary had himself adopted a piecemeal method of attack by changing one of the allowances. The argument was then put forward that it was administratively impossible, because of difficulties for the Inland Revenue, to change anything other than that one allowance at that time. Everything else was resisted on administrative grounds, including the allowance for blind persons, which is only now to be increased.
It is clear that the Minister of State—who has had this task wished upon him by the Chief Secretary—cannot reply using the arguments which his right hon. Friend advanced last year. Any objection to a piecemeal approach has clearly disappeared entirely, because two of the allowances have been increased on a piecemeal basis. If the additional personal allowance and the blind persons' allowances can be increased, there is no reason why increases cannot be considered for other allowances. My amendment seeks to increase one of them.
Similarly, although the argument against the amendment could be founded on administrative reasons at this stage, that is only because the Government must have taken a decision not to increase this allowance. Had the Government decided to include it in the original Budget proposals, there would have been no administrative problem on top of the other tasks for the Inland Revenue which flowed from the Budget proposals.
At the least we are entitled to ask that the Minister of State should not rely on either of these arguments but should acknowledge that a definite decision was taken not to help people which benefit from dependent relative allowances, and give clear reasons for having taken that decision.
This amendment is designed to help those who have taken on, or had wished on them, the task of caring for elderly or infirm relatives, such as a mother or mother-in-law. In addition to the allowance payable to people generally who are doing this, there is an extra allowance for single women looking after dependent relatives. In general, the allowance is £100, but for single women it is £145. My amendment seeks to preserve the difference between the allowances payable to single women and others—the Minister may wish to argue about that matter later. The amendment increases the figure from £100 to £140 in the one case and from £145 to £200 in the case of the single woman looking after a dependent relative.
6.0 p.m.
I do not pretend that this is an indexing amendment or anything of a subtle or sophisticated kind. I have not calculated the exact rise in the cost of living since the allowances were last increased and applied it to the figures. But it is some years since the allowances were increased, and no one can deny that we have rapid inflation. It would be difficult to suggest that the problem facing people in this situation has become any less difficult. Therefore, I suggest that it is time that we looked at the matter again on the basis of the figures in the amendment or, if the Minister of State has better figures to substitute, on the basis of his better figures.
I find it difficult to see what arguments—we shall no doubt learn in a few


minutes—the Minister of State can deploy against this proposition. For example, I do not see how he can argue, as the Chief Secretary did to some extent last year, that the problem has been taken care of, because the Chancellor increased the allowance for all single people in the Budget. Clearly that does not meet the point. This is a special problem which demanded a special allowance in the past and cannot therefore be met by a generalised allowance now. It does not seem good enough to rely on what the Chancellor has done for the general body of taxpayers.
Similarly, it cannot readily be said that this proposal will primarily benefit those who are very well off. In fact, part of the provision is a fairly strict—indeed, perhaps over-strict, though I have not sought to change it in the amendment—limitation on the income which can be received by the dependent person before the allowance is lost. It does not go to the millionaire son looking after his millionaire mother. In that sense it does not seem that the Minister can apply the standard argument that we would be helping the wealthiest the most.
It cannot be said that this proposal would be helping the undeserving. Most of us have recently paid particular attention to the problems of single people, especially those who are looking after children. Most of the arguments which apply to children apply equally to very old people who often are not in receipt of any great income and therefore cannot look after themselves and have special requirements of various kinds. We cannot have the category to whom I am now referring separated in some way as being less deserving than the groups to which the Government have paid attention in the last year or so.
There is possibly the argument that an allowance which gives special benefit to single women rather than to single men who might be in a comparable situation is a bit odd in this day and age. I am more than willing to listen to an argument that that anomaly should be removed and that the whole allowance should go to the higher level.
We are all keen to see greater equality of treatment, whether under the Sex Discrimination Bill or in some other way, but however keen we may be to see the world change in terms of social attitudes

we still have to deal with the world as it is. I guess that there are many more single women experiencing difficulty in this situation than other categories. Therefore, I think that for the moment it is reasonable to go on treating them specially in this way on purely practical grounds.
I suspect that when all is said and done the Minister will have relatively little to rely on except the cost. I have not got detailed and definite figures, but from figures given to me in Parliamentary Answers at this time last year, I judge the total cost of the amendment to be £15 million, or something of that order, Of that, I suggest that about £4 million or £5 million relates to the increase specifically proposed in the amendment for single women supporting dependent relatives. I accept that in present circumstances and with our great worries about the balance between the Government's expenditure and income, £15 million may be a large sum to advocate in a fairly casual way, but the £4 million or £5 million needed to help single women is not so large. If I had put down the slightly more modest amendment that I put down last year, the allowance would be raised to about half way between where it now is and what I am proposing, and the cost would be about £2 million or £21½million on last year's figures. But even that would be a useful and much needed gesture showing the Government's concern for this group of people.
I do not want to press the Minister too hard and, from my point of view, too irresponsibly at this time, but I hope that at least he will indicate a willingness to consider that special aspect of the problem—the single woman with a dependent relative. If he does not accept my increase from £145 to £200, I ask him to think about some smaller figure which would minimise the cost still further.
I believe that there is a strong case for a special allowance, and I refer particularly to the single woman aspect. I think that I am right in saying that this special allowance was introduced by the Foreign Secretary, then Chancellor of the Exchequer, in the late 1960s, and it has been consistently supported strongly by hon. Members on both sides of the Committee. For example, last year my hon. Friend the Member for Worthing (Mr. Higgins) spoke strongly in support of this


proposition from the Opposition Front Bench. The former Member for Woolwich, West, the late William Hamling, whose absence from our debates we shall sorely miss, also gave us some support on this matter in the debate last year. There is a wide measure of agreement about these social problems and many people would welcome it if the Minister indicated some movement on this front in replying to this short debate.
I accept that the problem of the single-parent family is difficult, but there is the great danger that in these tax matters we shall fall into the trap of moving from fashion to fashion. The single woman with a dependent relative was the fashion of the 1960s. The single-parent family has become the fashionable concern of the 1970s. Both are genuine concerns, and I share them. I wholeheartedly support and welcome what has been done for the single-parent family—and especially the woman with children—but I cannot see any good reason why the Government should not, this year, extend some measure of additional help to the other group about which I have been talking, especially the single woman with a dependent elderly relative.

Mr. Robert Sheldon: The hon. Member for Braintree (Mr. Newton) in his concluding remarks, said that there was a fashion in sympathy. I accept the purpose of what he was saying then. From time to time some social work is carried out which brings to light anomalies and deficiencies of which we were not aware. We are grateful for the understanding that we get about many of these problems, and we need to react to them. We might in certain circumstances over-react, but I take the point made by the hon. Gentleman.
The intention behind the amendment is to increase from £145 to £200 the allowance for single women supporting dependent relatives and the maximum allowance for other claimants from £100 to £140.
The hon. Gentleman went into the question of the cost. As usual on these matters, he is very near the figure that we have produced. Our estimate is that the cost would be £13 million for 197576 and £16 million for a full year. I

compliment the hon. Gentleman on his research into these matters.
The most important part of what the hon. Gentleman said concerned single women and the sympathy that they obviously evoke from all of us in the way that some—more in the past than at present, but still continuing—have devoted their lives to the care and maintenance of parents and have frequently sacrificed their marriages into the bargain.
This was much more the situation years ago than it is now, I am glad to say, but we still have cases of this kind. It is right that we should be aware of them and as understanding as possible. We know now, from the differences that exist in the way people behave, that single men also have this problem, to an increasing extent. It used to be the province of the daughter to do this kind of work, but it is now less so. Due to smaller families it is frequently a son who has to bear this kind of burden, and also couples.
The situation is therefore not quite the same as that which existed some years ago. Then we had to take account of the problems caused by the lower earnings of single women. Only recently has there been a determined move to put this right. One of the main purposes of this allowance was to take into account the fact that if a single woman were supporting a dependent relative, she was supporting that relative on an income that was likely to be lower than that of a man placed in the same situation. There is still some-think in this argument. We must not forget that although we have passed legislation we are still a long way from equality of earnings. However, the gap is diminishing and we hope that it will continue to diminish. Therefore, although there is a case for an allowance, a case has not been made out for increasing it.
I understand the case for increases in the secondary allowances, in view of the time that has elapsed since many of them were last changed. The dependent relative allowance, except where the claimant is a single woman, was last increased in 1960. Consequently, over the years there has been a greater tendency for secondary allowances to fall behind the value that they had when they were last fixed. By contrast, primary allowances are increased more frequently, although, as we heard in recent debates there is no


natural linkage with prices or any other factors.
Over the years, Chancellors have taken the view that the preferable course is to concentrate attention on the single and married allowances and the child tax allowances. In this way, either the tax thresholds in general or the tax thresholds for those with families are increased over a broad sphere. Any general increase in tax thresholds benefits those who are entitled to one of the secondary allowances as well as those who are not. This is a better way to use the resources available.
I note the compliments that the hon. Member for Braintree paid in respect of the two increases in the additional allowances for single-parent families.
The case for the general dependent relative allowance is lessening. The great majority of those who are looked after as dependants qualify for the State pension. The State retirement pension for the single person is £11·60, and it is shortly to be increased. This is a pension that most dependent relatives are qualified to receive. Naturally, attention has been focused on assisting the person for whom the younger taxpayer is providing. This has been continuing, and this is where the greatest attention should be directed.
Therefore, there is a case for these allowances, but the case has not been made out for increasing them. I ask the Committee to reject the amendment.

6.15 p.m.

Mr. David Howell: The Committee will be grateful to my hon. Friend the Member for Braintree (Mr. Newton) for raising this matter and for putting the case lucidly.
The Minister of State has addressed himself seriously to a section of the community which attracts all our sympathies. There is nothing more debilitating and difficult for an elderly single person, perhaps, for an elderly lady than to find that she has a still older relative—perhaps her mother, mother-in-law or fatherin-law—who has increasingly to be looked after, dressed and undressed and given all the attentions demanded. This is a harsh and torturing way of life, and it is one that attracts our sympathies. We need to look carefully at any propositions for making it easier in any of the variety of ways that are at the dis-

posal of Parliament and the Government, whether through the social security system or through tax allowances.
Although the Minister of State made a serious speech presenting the points as they struck him, I was surprised to hear him say that the case is now decreasing because the benefits accruing to infirm, dependent relatives are increasing. That is not quite such a valid case as he made out. We are dealing with allowances that were fixed a long time ago. As the Minister said, the £100 deduction for dependent relatives was fixed in 1960. Although we do not want to get into arguments about indexing, it makes nonsense of his point that there is not a valid case for increasing these allowances when we compare the sum of £100 in 1960 with the same figure now.
The £145 deduction from total income, which my hon. Friend the Member for Braintree would like to increase to £200, was set out in the Finance Act 1971 and was fixed in that year at that level. I do not know what has been the total inflation rate since the 1971 Finance Act—I do not have that at my fingertips—but I do know that in the past year currency has depreciated by about a quarter. Therefore, one way and another the value of that allowance has shrunk mightily.
We shall have to press the Minister of State again on his argument that, on the one hand, there is a valid case for special allowances but, on the other, there is not a valid case for increasing them and adjusting them to modern, sadly depreciated values of the pound and of the incomes against which these deductions would be made. The Minister is not on very secure ground and the case he has put is not a substantial one.
The Minister has said that the cost would be £16 million. Conservative Members have taken the view—and we shall take it throughout the Committee—that we should not put forward proposals which would weaken still further what many people believe to be the crumbling deficit situation that the Government face and the enormous public sector borrowing requirement that they have generated over and above the deficit. Indeed, in other debates we have argued, and we shall continue to argue, that any proposals we put forward can and must be offset by tax changes elsewhere. That


applies particularly to our arguments on the high rate of value added tax. Therefore, we recognise that £16 million is, in the delicate balance of the Government's somewhat shaky finances, a substantial sum.
If I were getting on in years and struggling to look after someone even older, facing the sort of difficulties I have described, I would have reason for feeling a little bitter that we could not find the £16 million, or the lesser sum for single women, when I compared that with the millions of pounds which we let run through our fingers in Parliament through Bills such as that which we were discussing to look after someone even older, food, postal services, or railways.

Mr. Newton: There was one point on which I meant to interrupt the Minister but on which perhaps I may interrupt my hon. Friend. I do not think that we have yet had the figure for the cost of the single women part of the amendment as opposed to the total cost of the amendment. However, I see now that the Minister does not have that figure with him, and I apologise.

Mr. Howell: We shall clearly not get that figure this evening. However, as my hon. Friend was so accurate in his figure of £15 million, although the Minister says it is £16 million, my hon. Friend's estimate of £5 million was probably just as accurate. Perhaps we are talking of £5 million or £6 million.

Mr. Lawson: Does not my hon. Friend agree that the true costs may be even less, because those who are looking after elderly relatives are saving the taxpayer considerable sums which otherwise would have to be paid out in various other benefits to these elderly persons if they were not looked after in this way?

Mr. Howell: My hon. Friend is making a good case. The devotion which the younger or middle-aged generation show to their elderly relatives, their refusal to allow a change in the arrangements, whereby they would go into a home or something like that, and their insistence in looking after them, is very commendable and obviously saves additional burdens on public resources, so the net cost level might be even lower.

Mr. George Cunningham: Does not the hon. Gentlemen agree, however—I am sorry if this point has been made when I was not in the Chamber—that there is a means by which a person can obtain tax relief on any expenditure he has in respect of a dependent relative, namely, by taking out a deed of covenant in favour of that relative? Then the amount of income which can be covered and is, therefore, tax deductible for this purpose, is not limited to £100 in respect of a normal case and £140 is respect of any special case. There is a means of getting the tax relief.

Mr. Howell: I am not so sure that the deed of covenant approach is, first, as easy or as simple for some of those about whom we are talking or, second, that it necessarily meets the case I am talking about.
I agree with the Minister that we must approach this problem from a number of angles. There are a number of ways in which we can bring relief to people who have to look after elderly people who are living in their homes—have to care for them and have to incur the expense and drudgery of doing so. In better times than the times this nation is in now, I would argue vigorously that this is one of the ways that we should use, as well as any other ways which can be devised. We are in very bad times, when every penny counts and the kitty is empty, but many millions of pounds are pouring out into other areas of public spending which many people would feel have a lower claim on our sympathy and a lower priority than what we are discussing.
We do not intend to press this amendment; we merely wish to register our view that if this time of stringency, of our economic retrenchment, were not quite so much at the top of the agenda, we should consider this a very important priority indeed. Even now we recognise the feelings of those who would claim that this is a more important priority than some of the other expenditure being so cavalierly incurred by the Government. We recognise the contribution of my hon. Friend the Member for Braintree on this matter. We have put a marker on the vital importance of this sector and of those who would have benefited by the


amendment if it had been carried. We leave the matter there. In view of what I have said, perhaps my hon. Friend will say something about his attitude to the amendment.

Mr. Newton: I want to make only two brief comments. First, I endorse very strongly what has been said by my hon. Friend the Member for Guildford (Mr. Howell) about the internal inconsistency of the Minister of State's reply. One cannot really argue, at one and the same time, that there remains a valid social case for these allowances, even if they affect diminishing numbers, and that it is right to leave them undisturbed for 15 years—or for four or five years, according to the part of the allowance one is considering—at a time of very rapid inflation, which on present form is halving the value of money about every four years. If there is a useful social purpose to be performed by these allowances, to allow them to drop in value at the kind of pace represented by present inflation seems to be a policy which the Minister can scarcely defend.
I accept much of what the Minister said about the way in which, as the world changes, the original justification for some of these allowances will change. But it seems to me that the Minister can get around the problems that that creates for him by making sure that the qualifying income limits for the person being looked after are kept below some appropriate figure—presumably the normal level of national insurance pension. Then one would be concentrating the help on the group which reflect the era that the Minister argues is disappearing—those who have special needs which the existing system is not meeting as it is meeting them for a growing number of people. The thing would phase itself out as the social pattern changed. Meanwhile, one would be continuing to meet the social need, which the Minister recognised.
Like my hon. Friend, I do not think that it would be right to press this matter to a vote. At this stage the appropriate thing to do, without withdrawing anything I have said about my concern on this matter, is to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[MrS. LENA JEGER in the Chair.]

Mr. Lawson: I beg to move Amendment No. 53, in page 19, line 8, at end add:
'(4) In section 10 of the Taxes Act (Children) for any reference to £115 there shall be substituted a reference to £240'.
This amendment is very similar to an amendment which was very ably moved by my hon. Friend the Member for Norfolk. South (Mr. MacGregor) on this very day last year. I am glad to see him present today. I hope that he will take part in this debate.
The point of the amendment is that under the Income Tax Acts, the law as it now stands provides that if a child has an income, for every pound of income over £115 a year the parent loses £1 of the child allowance in respect of that child, until eventually, if the income rises sufficiently, the child allowance is extinguished altogether. By the amendment I seek to raise that limit to £240.
This is a very modest amendment. No doubt the Minister of State will tell us what he estimates would be the cost of it. My estimate is that it cannot he more than £5 million. I base that on the fact that when the Chief Secretary replied to my hon. Friend last year, he gave the cost as in the range of £3½ million to £4 million a year. The rate of inflation, even under the present Government, has not been so great that the cost this year could be more than £5 million. I can put that £5 million in its context—if it is £5 million—by saying that the present Government are spending public money at a rate of £1 million every 10 minutes, so at the very worst this would be less than an hour's expenditure spread over a whole year.
The child's income limit was introduced originally in 1920. I shall not weary the Committee by going right back to 1920. However, in 1952–53 it was set at £85. At that time—and there is logic in this—it was the same as the child allowance. In 1957–58 it was raised to £100, which again was the same as the child allowance for a child of 11 years of age or under. In 1963–64 it was raised to £115, which again was the figure to which the child allowance was then raised. Since


then something very strange has happened. The child allowance has progressively increased, so that it is now £240 for a child of 11 or under, but the child's income limit has remained stuck at the 1963–64 level of £115.
6.30 p.m.
In a Written Answer a short time ago the Minister of State, I think in reply to my hon. Friend the Member for Beeston (Mr. Lester), said that if the 1963–64 child's income limit had kept pace with inflation it would now be about £275. Since the child allowance is actually only £240, this shows the extent to which the child allowance has failed to keep pace with inflation. But for the child's income limit it has not changed at all, and is now worth very much less. This is a modest amendment, inasmuch as what is proposed is that, as heretofore, it should be the same as the child allowance, namely, £240.
The present meagre income limit is causing very great hardship and very great ill-feeling, among admittedly a minority of the population, but they should not be disregarded on that account. In particular, it affects students who try to earn a little money in the vacation. What happens is that for every pound they earn over the £115 limit, they are in effect—if they are good enough to make good the loss which the parent suffers through being deprived of that amount of the child allowances—being taxed straight away at the marignal rate of the top slice of the parent's income—at the very least 35 per cent.—for every pound over £115. This is very steep and thoroughly inequitable.
The inequity is at its highest in the case of students who are on sandwich courses. I have had representation in particular from constituents whose children are in that position. The student on a sandwich course has to work as part of the course. It is an integral part of it. By virtue of the student doing this, and having an income, the parent is losing the child allowance progressively, and a very considerable burden arises as a result.
I happen to believe that probably, given the state of our economy, we are too generous in our treatment of students. Probably we should look seriously at the

question of student grants with a view to turning them partially into student loans. I am convinced that we should not have this harsh discrimination, however, against these students who are either on a sandwich course or wish to work to help their parents who are often not very wealthy. It is not equitable to single out for harsh treatment those students who earn money by working during the vacations.
It is not merely university students, nor incidentally, is this a party political point. I was very struck, in the Second Reading debate on this Finance (No. 2) Bill by the speech from the hon. Member for Thornaby (Mr. Wrigglesworth), when he drew attention to this very real hardship and very real inequity, and asked the Chancellor of the Exchequer to do something about it. He quoted a statement from one of his constituents which referred to the hardship in rather vivid and apt language. This constituent wrote to the hon. Member and said that
the ordinary children's paper rounds and weekend jobs are being sacrificed on the altar of fiscal drag."—[Official Report, 8th May 1975; Vol. 891, c. 1713.]
This sort of figure, £115 in a year, is what might be earned for a paper round. Probably much more than that could be earned for a paper round. It really is extremely harsh to keep the limit at that level. One wonders why it is being kept at that level.
In this connection it is interesting to consider what the Chief Secretary to the Treasury said in answer to my hon. Friend the Member for Norfolk, South in the debate in June last year on the 1974 Finance Bill. The Chief Secretary was not concerned about the earned income of the child. He fully conceded the point as far as earned income was concerned. What he was worried about was investment income, although he fully conceded the trivial cost involved. He suggested in particular the case of a grandparent making a covenant to a child under which the child would have an investment income.
This aspect must be considered, but there are a number of points arising in respect of investment income. First of all, one is talking about a very small investment income. This amendment is only related to the difference between £115 and £240. If there are big investment incomes


over £240, the excess over £240 will not be affected at all by this proposed amendment. The £115 is the sort of income that nowadays might be expected on a capital of £1,000. It is not a vast capital sum at all. The proposed limit of £240 is the sort of income that might today be expected very roughly on a capital sum of £2,000. This £2,000 capital which a child might have is the same as the amount at which it originally stood in 1963–64, assuming that the £115 then represented a yield of something like 5 per cent.—although because of the subsequent rate of inflation, was then worth a great deal more than it is now. So it could be argued that this amendment is over-modest as it is not really a full return to the situation in 1963–64.
The reason for the Chief Secretary being worried about investment income was that, as he said at the time, the law was about to be changed concerning children's investment income. He said that the Government were about to bring back aggregation, and that this would he done in the second budget of 1974, so that it was foolish before then to start making any changes affecting a child's investment income when other changes of a different kind were to be made in a few months' time. But the second Budget of 1974 came and went, and there was no aggregation. The Finance (No. 1) Bill of 1975 came, and again there was no aggregation in it. It was understood that it was coming in the current Finance (No. 2) Bill, but again there was no aggregation. One cannot go on waiting and waiting to see what the Government intend to do about aggregation. This excuse for postponement is not a valid one. The Government must look at the issues on their own merits.
Although the Government have not stated why they have postponed aggregation, there is a very good reason why they should have done so. In the intervening period they have introduced the capital transfer tax. This links up with the present amendment in more than one way. In the first instance, under the capital transfer tax, on the capital itself there is no aggregation between the parent and the child for if the parent gives money to the child, however young the child may be, that is a taxable, chargeable, capital transfer. They are regarded as separate individuals for capital purposes.

Therefore it would be wholly illogical if they were regarded as one for the purposes of income arising from the capital. One cannot logically have non-aggregation, and therefore liability to capital transfer tax, on capital, and non-aggregation when it comes to the income from that capital.
But it affects the situation also in another way. The Chief Secretary was very worried about gifts of capital to children, whether by covenant or in other ways, which would enable them to have an investment income and would result in less tax being paid. This will now be deterred by the capital transfer tax, which was not in force at the time of our debate a year ago. My hon. Friend perscipiently pointed this out at the time. Perhaps I may quote from the Second Reading debate last year because my hon. Friend put the point specifically to the Chief Secretary that once the capital transfer tax was in force this would deal with the problem. It would deter the transfers about which the Chief Secretary was so concerned and, if some did take place, a tax liability would arise from the capital transfer and the Revenue would still get its money.
The Chief Secretary then said:
I take the point that if the grandparent was caught by the gift tax that might dissuade him from making any transfers. Therefore, that again might be the occasion for increasing the allowance."—[Official Report, 10th June 1974; Vol. 874, c. 1288.]
The capital transfer tax is on the statute book. The grandparent is caught. Therefore, by the Chief Secretary's own admission, this is now the time for increasing the allowance. I beg the Minister of State to be consistent with what his close friend and colleague the Chief Secretary said in our debate a year ago. The Chief Secretary said then that this would be the occasion to increase the allowance. Now that the events which the right hon. Gentleman discussed then have come to pass, the Minister of State ought to feel honour bound to accept this amendment.
I hope that the hon. Gentleman will accept this very modest amendment and that the Opposition will not need to press it to a Division. On all sides of this House, the cogency and force of the amendment have been agreed both on Second Reading and in our debates last year. Moreover, its cost would be even


smaller than the cost of the previous amendment that we debated.

6.45 p.m.

Mr. Ronald Bell: I support the amendment, and I regret that I missed the first two minutes of the speech of my hon. Friend the Member for Blaby (Mr. Lawson), who was called earlier than I expected. This is an amendment which can be justified on the ground of inflation alone and the change of the value in money.
I hope that the Minister of State will not offer Treasury reasons for rejecting it, because it is now a matter of manifest justice. A Member of Parliament is probably well served by his post in judging a matter of this kind. When an hon. Member begins to find his constituents complaining that something is unjust he knows that the time has been reached when the legislature should look again at its arrangements. I find—and it is understandable—that someone, a student, can earn £115 very quickly nowadays.
I am sure that my hon. Friend the Member for Blaby made out a very good case for the generality of his amendment, which would include unearned income as well as earned income. I am especially concerned, however, with earned income. If it should be the case that the Government, as symbolised in the person of the Minister of State, find it disagreeable to meet the whole of my hon. Friend's case, let me remind them that we are, after all, in Committee and that there will be an opportunity on Report for the Government themselves to propose an amendment limited to earned income. That would not worry me greatly, although I think that a logical and just case can be made out for the whole of the amendment. In relation to earned income there can be no defence against the argument of my hon. Friend the Member for Blaby.
If £115 was right when it was the sum specified, a larger sum must be right now. In the computation for grant to a junior member of a university vacation earnings are not counted, and it seems very odd that, though a junior member of a university may earn more than £115 in his vacation and that is not counted as income diminishing his local authority grant, his earning more than £115 increases the burden on his parents in that

he ceases pro tanto to be a dependent child. Equally, of course, if he is over 18 years of age, as students nearly always are, there is no aggregation of the earned income, and so the earnings are not subject to income tax. Therefore, this provision in our legislation appears to be something of an anomaly in relation to earned income and, as I say, on the sole ground of the change in the value of money an increase would be appropriate.
I ask the Minister of State to give careful consideration to this amendment. If he cannot accept it now let the Treasury mull it over and move an amendment at a later stage to deal with the earned income of children, whether or not they are over the age of 18, so as to bring this provision up to date and to make it conform to the other tax provisions relating to the earnings of children.

Mr. John MacGregor: I support the amendment, and I thank my hon. Friend the Member for Blaby (Mr. Lawson) for bringing it forward since, as he said, I moved a similar amendment on this very day last year. My remarks will be brief, because my hon. Friend has covered most of the points.
Were I not becoming cynical about our debates on Finance Bills I should have expected the Government to be in honour bound to accept this amendment. I believe that we have a cast-iron case in proposing it. My hon. Friend the Member for Blaby made one quotation from the reply of the Chief Secretary to our debate last year. Perhaps I might make one further quotation. A little earlier in that same speech, the right hon. Gentleman said:
I should like to see the allowance increased because it has been well overtaken by inflation over the years …"—[Official Report, 10th June 1974; Vol. 874, c. 1287.]
The right hon. Gentleman went on to mention two problems to which my hon. Friend the Member for Blaby referred—capital transfer tax and aggregation. However, in both these we have had since then significant developments which mean that the right hon. Gentleman's arguments against us last year no longer apply.
Before coming to those developments perhaps I might make two other remarks. If I heard my hon. Friend the Member


for Blaby aright, he said that on an indexed basis the figure today should be £275 compared with what it was in 1963–64. At this time last year, in order to frame my own amendment, I tabled a similar Question to that referred to by my hon. Friend, and I was told that the appropriate figure at that time was £215. Thus we see the importance of indexation in these matters. Between 1963–64 and 1973–74, the figure rose from £115 to £215. Between last year and this, it should have risen to £275.
That was one of our first indexation debates on a Finance Bill, and I remember saying that we were perhaps ahead of public opinion and, I hoped, were leading it. Judging from the number of indexation debates on tax allowances and thresholds that we have had since then, not only has the argument grown here in this Chamber but public opinion appears to be following us.
Before coming to the arguments of the Chief Secretary last year, the other main points that I wish to bring out relate to earned income and student earnings. I wish to add two other matters to those already raised on this score.
Many parents are putting the point to me that they are severely disadvantaged by this limit of £115 since it is very easy for a student to earn that sort of figure in the summer vacation without working all that many weeks. I believe that unless we raise this limit we shall find, as in so many other tax measures, that we are providing an incentive to fiscal immorality and that many earnings will not be declared for tax. That is unwelcome.
The second point I wish to raise in relation to student earnings is that keeping the limit where it is, coupled with the fact that parents above a certain level of means have to contribute significantly to the cost of keeping children at university, because with the application of the parental means test they do not get grant, leads to certain groups being hit in every way. They are being forced to pay the total, or a very high proportion, of the cost of university education for their children. They find that if their children try to earn during the summer in order to alleviate the burden on their parents their tax allowances are similarly reduced. Many parents may pay a high rate of

tax and the marginal rate of tax on the child's earnings is very high. Because of inflation, the refusal to raise the allowance, and the impact of the parental means test at a not particularly high level of income, this group is being heavily hit.
I turn to the two significant developments. The first is the capital transfer tax, which my hon. Friend the Member for Blaby has dealt with very well. He made the point that the Chief Secretary last year said that having got that on the statute book this might be an occasion for increasing the allowance. It is not necessary to add much to that remark.
I wish to deal briefly with aggregation, because the Chief Secretary spent some time dealing with it last year. To put that forward as a reason for not increasing the allowance now is irrelevant, first because we now have no idea when that particular proposal will come on to the statute book. Meanwhile, this injustice, which the Chief Secretary last year accepted, is continuing.
Secondly it is irrelevant because it would be perfectly possible to deal with the problem when the aggregation of children's income comes forward, if it does. It would be possible to introduce it for investment income by some special measure in the set of proposals put forward on aggregation of investment income. One assumes that it would not be the intention of the Government to apply a limit of this sort on earned income if aggregation were introduced, because if that were done the parents would again be hit both ways. They would find that the highest rate of tax that they would pay would apply to the earned income of their children and at the same time their allowances would be reduced. I assume that it would not be the intention of the Government, if aggregation were introduced, to apply this limitation to earned income. Therefore, it would only apply to investment income. It would be perfectly easy to deal with that when the proposals were introduced.
The two arguments put forward last year no longer have force, because of the changes that have taken place since. Therefore, I hope that the Minister of State will be able to remove my cynicism on this occasion.

Mr. Sheldon: I am always interested in removing cynicism. I have always


taken the view that time spent in the House tended towards the increase not of cynicism, but of understanding. Cynicism may be an early growth, but it does not normally last long and I hope that that will prove to be true of the cynicism felt by the hon. Member for Norfolk, South (Mr. MacGregor).
The income tax child allowance has three rates—£240 for a child under 11 years; £275 for a child between 11 and 16 years; and £305 for a child over 16 years. What the hon. Member for Blaby (Mr. Lawson) said at the outset of his speech was quite right: if the child's income is less than £115, the tax allowances are available in full. For every £1 of that child's income greater than £115, £1 is withdrawn from the child's allowance.
The amendment moved by the hon. Member for Blaby seeks to increase the child's income limit from £115 to £240. The child allowance that exists at present is for the dependent child. Therefore, it is right that it should be withdrawn gradually either in the way that is enshrined under present tax law or in some other way. It must be generally agreed that it must be withdrawn in that way as the dependency of the chill diminishes. The removal of that allowance is on the pound for pound basis.
It must be remembered that the child's income before the allowance is wholly lost goes up whenever the allowance is increased. I shall express that in another way which might make the point clearer. My explanation is based on figures that can be calculated by anybody. The allowance is not entirely lost until the child's income reaches the level of £355 for a child under 11 years; £390 for a child from 11 to 16 years; and £420 for a child older than 16 years. Up to those levels there is still some benefit for the child from the child allowance.
I shall express the point in another way in order to bring to bear on this matter as many views as I can. The first £355, £390 and £420 of the child's income, depending on age, is wholly exempted from tax. Even in these days those are not trivial sums and allowances are still available within these limits.
The increase in the limit sought is for both earned and unearned income. I

should like to put the bon. Member for Blaby right on the matter of cost. The cost will be £12 million for the full year and £10 million for 1975–76.

Mr. Lawson: I intervene to correct an error I made, but to correct it in a way that the Minister does not imagine. I said that the Chief Secretary last year used the figure of £3½ million to £4½ million. I was speaking from memory. The Chief Secretary in fact said that it would be
£3 million in a full year … and about £2½ million in 1974–75."—[Official Report, 10th June 1974; Vol. 874, c. 1287.]
How on earth can the Minister of State tell us that the cost of the amendment has gone up from £3 million last year to £12 million this year?

Mr. Sheldon: I should like to look at the question that elicited that answer to see what differences there might be in the question and answer. These are the figures that I have. I shall repeat them. They are £12 million in a full year and £10 million in 1975–76. This assumes about 160,000 taxpayers being affected.

Mr. Ronald Bell: Has the Minister of State a division of that figure into the cost of the concession for earned income and unearned income?

Mr. Sheldon: I regret that I do not have that break down before me.
I turn to the substance of the arguments put by the hon. Member for Blaby, the hon. Member for Norfolk, South and the hon. and learned Member for Beaconsfield (Mr. Bell). I understand very well that there is a case—I have read the debates that took place in Standing Committee—for moving in the direction of the amendment when the parent-child aggregation has been brought back, so that any changes will affect only the child's earned income, given that child allowances will in any event begin to disappear in 1977. But there is something to be said for leaving things unchanged until the whole system alters.
Here I reply to the hon. Member for Norfolk, South. It certainly is our intention to proceed with legislation on aggregation. One of the problems if we try to make these changes in advance of aggregation is that of avoidance concerning unearned income, which was discussed in the debates upstairs on the previous


Bill. We see the case for increasing the child's income limit when we bring about the changes that we intend to make.
The child's tax allowances have a limited life. We shall be seeing the passage of the Child Benefit Bill. Both the child tax allowances and the family allowances are to be replaced by the new child benefit scheme. These matters will need to be taken into account. Obviously we shall be considering the views that have been expressed. There is a need to consider them in the light of the new system that is to replace the present one. We accept that the case has been made for a further look at this once we get the new scheme into operation.

7.0 p.m.

Mr. Lawson: I have been extremely disappointed by the Minister of State's reply. He was far less forthcoming than the Chief Secretary was in dealing with the similar amendment last a year ago. I do not want to be unkind, but it seems to me that he was perhaps not as well briefed as he might have been. In the first instance, he referred to the earlier discussions on the previous amendment upstairs, when in fact we had that amendment, like this, on the Floor of the House and not upstairs in Committee.
Secondly, the Minister quoted a cost of £12 million, when last year we were given by the Chief Secretary, a senior Minister at the Treasury, the figure of £3 million. The hon. Gentleman said that he would have to see whether it was a different question. It was slightly different. The amendment then was to put up the child allowance by £100, from £115 to £215. This year, because of inflation, it is to put it up by £225, from £115 to £240. This difference of £25 cannot possibly mean a fourfold difference in cost. It cannot possibly be right that an increase of 25 per cent. would make an increase in the cost of 300 per cent. Therefore, the Minister of State has unfortunately on this occasion been badly briefed and has not been able to give us the help that he might otherwise have been able to give.
This is a hard case, which, as my hon. Friend the Member for Norfolk, South (Mr. MacGregor) and my hon. and

learned Friend the Member for Beaconsfield (Mr. Bell) have described, is causing a considerable sense of injustice and grievance among the parents—not particularly well-off—of children at university and other places of higher and further education, in particular, those children on sandwich courses. I am sorry that the Minister made no reference to the point about sandwich courses. The children on such courses are particularly hard hit.
I do not want to detain the Committee any longer, but in view of the wholly unsatisfactory nature of the Minister's reply I must press the amendment to a Division and ask my hon. Friends to support me.

Mr. Ronald Bell: I, too, am most disappointed by the Minister's answer. One has not often heard a less satisfactory answer to a debate. I felt that the Minister virtually read without alteration the brief supplied by the Treasury, and that not a word was changed by the debate.
If the Minister wants justification for the urgency and importance of the amendment he will find it in his own figure of £12 million as its cost, compared with the cost of £3 million for an only slightly smaller increase than a year ago. The reason can only be that the higher scales of tax have come down to apply to many people with much lower real earnings, because of inflation, and therefore the cost in money has gone up, because many people with more modest incomes are disadvantaged by this system. That is something to which the Minister has not addressed his mind.
I can see no reason why, because the Government have it in mind to introduce a new system of allowances for children in perhaps two or three years' time, an amendment to this effect should not be accepted now to provide for the situation in the next two or three years. What is the difficulty? It will not prejudice the changes which are brought about later. It will avoid injustice to many parents during the next two or three years. I find it surprising that the Minister did not have a word to say about that. I hope that the amendment will be pressed to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 169, Noes 193.

Division No. 223.]
AYES
[7.07 p.m.


Adley, Robert
Harvie Anderson, Rt Hon Miss
Parkinson, Cecil


Arnold, Tom
Hastings, Stephen
Pattie, Geoffrey


Awdry, Daniel
Hawkins, Paul
Penhaligon, David


Bain, Mrs Margaret
Henderson, Douglas
Percival, Ian


Beith, A. J.
Hicks, Robert
Pink, R. Bonner


Bell, Ronald
Holland, Philip
Powell, Rt Hon J. Enoch


Benyon, W. L.
Hooson, Emlyn
Prior, Rt Hon James


Berry, Hon Anthony
Hordern, Peter
Rathbone, Tim


Biffen, John
Howe, Rt Hon Sir Geoffrey
Rees, Peter (Dover &amp; Deal)


Blaker, Peter
Howell, David (Guildford)
Renton, Rt Hon Sir D. (Hunts)


Boscawen, Hon Robert
Howell, Ralph (North Norfolk)
Ridley, Hon Nicholas


Bowden, A. (Brighton, Kemptown)
Hunt, John
Rifkind, Malcolm


Brittan, Leon
Hutchison, Michael Clark
Roberts, Wyn (Conway)


Brotherton, Michael
Irvine, Bryant Godman (Rye)
Ross, Stephen (Isle of Wight)


Brown, Sir Edward (Bath)
James, David
Rossi, Hugh (Hornsey)


Bryan, Sir Paul
Jenkin, Rt Hon P (Wanst'd&amp;W'df'd)
Sainsbury, Tim


Buchanan-Smith, Alick
Kaberry, Sir Donald
Scott-Hopkins, James


Budgen, Nick
Kershaw, Anthony
Shaw, Giles (Pudsey)


Bulmer, Esmond
Knight, Mrs Jill
Shepherd, Colin


Burden, F. A.
Knox, David
Silvester, Fred


Butler, Adam (Bosworth)
Lamont, Norman
Sims, Roger


Carlisle, Mark
Langford-Holt, Sir John
Sinclair, Sir George


Chalker, Mrs Lynda
Latham, Michael (Melton)
Skeet, T. H. H.


Clark, William (Croydon S)
Lawrence, Ivan
Smith, Cyril (Rochdale)


Clarke, Kenneth (Rushcliffe)
Lawson, Nigel
Speed, Keith


Clegg, Walter
Le Marchant, Spencer
Spicer, Michael (S Worcester)


Cooke, Robert (Bristol W)
Lloyd, Ian
Sproat, Iain


Cope, John
Loveridge, John
Stainton, Keith


Cordle, John H.
MacCormick, Iain
Steel, David (Roxburgh)


Costain, A. P.
McCrindle, Robert
Stewart, Donald (Western Isles)


Crawford, Douglas
McCusker, H.
Stewart, Ian (Hitchin)


Critchley, Julian
Macfarlane, Neil
Stokes, John


Crowder, F. P.
MacGregor, John
Stradling, Thomas, J.


Dean, Paul (N Somerset)
McNair-Wilson, M. (Newbury)
Taylor, R. (Croydon NW)


Dunlop, John
Madel, David
Taylor, Teddy (Cathcart)


Durant, Tony
Marshall, Michael (Arundel)
Tebbit, Norman


Edwards, Nicholas (Pembroke)
Mates, Michael
Thomas, Dafydd (Merioneth)


Ewing, Mrs Winifred (Moray)
Maxwell-Hyslop, Robin
Thompson, George


Fairbairn, Nicholas
Meyer, Sir Anthony
Townsend, Cyril D.


Fletcher, Alex (Edinburgh N)
Miller, Hal (Bromsgrove)
Tugendhat, Christopher


Fletcher-Cooke, Charles
Mills, Peter
Viggers, Peter


Fookes, Miss Janet
Miscampbell, Norman
Wainwright, Richard (Colne V)


Fowler, Norman (Sutton C'f'd)
Mitchell, David (Basingstoke)
Wakeham, John


Gardiner, George (Reigate)
Moate, Roger
Walker-Smith, Rt Hon Sir Derek


Gardner, Edward (S Fylde)
Molyneaux, James
Wall, Patrick


Glyn, Dr Alan
Monro, Hector
Watt, Hamish


Goodhart, Philip
Moore, John (Croydon C)
Weatherill, Bernard


Goodhew, Victor
Morgan-Giles, Rear-Admiral
Welsh, Andrew


Gow, Ian (Eastbourne)
Morrison, Charles (Devizes)
Whitelaw, Rt Hon William


Gower, Sir Raymond (Barry)
Mudd, David
Wiggin, Jerry


Grant, Anthony (Harrow C)
Neubert, Michael
Wigley, Dafydd


Gray, Hamish
Newton, Tony
Wilson, Gordon (Dundee E)


Grimond, Rt Hon J.
Normanton, Tom
Winterton, Nicholas


Grylls, Michael
Nott, John



Hall-Davis, A. G. F.
Osborn, John
TELLERS FOR THE AYES:


Hamilton, Michael (Salisbury)
Page, John (Harrow West)
Mr. Russell Fairgreave and


Hannam, John
Page, Rt Hon R. Graham (Crosby)
Mr. Michael Roberts.


Harrison, Col Sir Harwood (Eye)
Pardoe, John





NOES


Allaun, Frank
Bray, Dr Jeremy
Craigen, J. M. (Maryhill)


Anderson, Donald
Brown, Hugh D. (Provan)
Crawshaw, Richard


Archer, Peter
Brown Robert C. (Newcastle W)
Cronin, John


Armstrong, Ernest
Buchan, Norman
Cryer, Bob


Ashton, Joe
Buchanan-Smith, Alick
Cunningham, G. (Islington S)


Atkins, Ronald (Preston N)
Butler, Mrs Joyce (Wood Green)
Cunningham, Dr J. (Whiteh)


Atkinson, Norman
Callaghan, Jim (Middleton &amp; P)
Dalyell, Tarn


Bagier, Gordon A. T.
Campbell, Ian
Davidson, Arthur


Barnett, Guy (Greenwich)
Canavan, Dennis
Davies, Bryan (Enfield N)


Barnett, Rt Hon Joel (Heywood)
Carter-Jones, Lewis
Davies, Denzil (Llanelli)


Bates, Alt
Cartwright, John
Davies, Ifor (Gower)


Bidwell, Sydney
Clemitson, Ivor
Davis, Clinton (Hackney C)


Bishop, E. S.
Cocks, Michael (Bristol S)
de Freitas, Rt Hon Sir Geoffrey


Blenkinsop, Arthur
Cohen, Stanley
Dell, Rt Hon Edmund


Boardman, H.
Cook, Robin F. (Edin C)
Dempsey, James


Booth, Albert
Corbett, Robin
Doig, Peter


Bottomley, Rt Hon Arthur
Cox, Thomas (Tooting)
Dormand, J. D.




Douglas-Mann, Bruce
Kelley, Richard
Rodgers, George (Chorley)


Duffy, A. E. P.
Kerr, Russell
Rodgers, William (Stockton)


Dunn, James A.
Kilroy-Sllk, Robert
Rooker, J. W.


Dunnett, Jack
Klnnock, Neil
Roper, John


Dunwoody, Mrs Gwyneth
Lamborn, Harry
Rose, Paul B.


Eadie, Alex
Lamond, James
Ross, Rt Hon W. (Kilmarnock)


Edge, Geoff
Lee,John
Rowlands, Ted


Ellis, Tom (Wrexham)
Lestor, Miss Joan (Eton &amp; Slough)
Sandelson, Neville


Evans, Fred (Caerphilly)
Lewis, Arthur (Newham N)
Selby, Harry


Evans, Ioan (Aberdare)
Lewis, Ron (Carlisle)
Sheldon, Robert (Ashton-u-Lyne)


Evans, John (Newton)
Lomas, Kenneth
Silkin, Rt Hon John (Depttord)


Ewing, Harry (Stirling)
Loyden, Eddie
Silverman, Julius


Fernyhough, Rt Hon E.
Luard, Evan
Skinner, Dennis


Flannery, Martin
Lyons, Edward (Bradford W)
Small, William


Fletcher, Ted (Darlington)
McElhone, Frank
Smith, John (N Lanarkshire)


Ford, Ben
MacFarquhar, Roderick
Spearing, Nigel


Forrester, John
Mackenzie, Gregor
Spriggs, Leslie


Fowler, Gerald (The Wrekin)
Mackintosh, John P.
Stallard, A. W.


George, Bruce
McMillan, Tom (Glasgow C)
Stewart, Rt Hon M. (Fulham)


Gilbert, Dr John
McNamara, Kevin
Stott, Roger


Golding, John
Madden, Max
Strang, Gavin


Gould, Bryan
Mahon, Simon
Summerskill, Hon Dr Shirley


Gouriay, Harry
Mallalieu, J. P. W.
Taylor, Mrs Ann (Bolton W)


Grant, George (Morpeth)
Marks, Kenneth
Thomas, Jeffrey (Abertillery)


Grant, John (Islington C)
Marshall, Dr Edmund (Goole)
Thomas, Ron (Bristol NW)


Grocott, Bruce
Marshall, Jim (Leicester S)
Tierney, Sydney


Hamilton, James (Bothwell)
Maynard, Miss Joan
Tomlinson, John


Hamilton, W. W. (Central Fife)
Meacher, Michael
Tuck, Raphael


Harper, Joseph
Mellish, Rt Hon Robert
Walker, Harold (Doncaster)


Harrison, Walter (Wakefield)
Mendelson, John
Walker, Terry (Kingswood)


Hayman, Mrs Helene
Millan, Bruce
Watkins, David


Heffer, Eric S.
Murray, Rt Hon Ronald King
Weitzman, David


Hooley, Frank
Newens, Stanley
Wellbeloved, James


Horam, John
Noble, Mike
White, Frank R. (Bury)


Hoyle, Doug (Nelson)
Oakes, Gordon
White, James (Pollok)


Huckfield, Les
Ogden, Eric
Whitehead, Phillip


Hughes, Rt Hon C. (Anglesey)
O'Halloran, Michael
Whitlock, William


Hughes, Mark (Durham)
O'Malley, Rt Hon Brian
Willey, Rt Hon Frederick


Hughes, Robert (Aberdeen, N)
Ovenden, John
Williams, Alan Lee (Hornch'ch)


Hunter, Adam
Perk, George
Wilson, Alexander (Hamilton)


Irving, Rt Hon S. (Dartford)
Parry, Robert
Wilson, William (Coventry SE)


Jackson, Miss Margaret (Lincoin)
Pavitt, Laurie
Wise, Mrs Audrey


Janner, Greville
Perry, Ernest
Woodall, Alec


John, Brynmor
Price, C. (Lewisham W)
Woof, Robert


Johnson, James (Hull West)
Price, William (Rugby)
Wrigglesworth, Ian


Jones, Alec (Rhondda)
Roberts, Albert (Normanton)



Jones, Barry (East Flint)
Roberts, Gwilym (Cannock)
TELLERS FOR THE NOES


Jones, Dan (Burnley)
Robertson, John (Paisley)
Mr. John Ellis and


Judd, Frank
Roderick, Caerwyn
Mr. David Stoddart

Question accordingly negatived.

Clause 28 ordered to stand part of the Bill.

Clause 49

RELIEF FOR INCREASE IN VALUE OF TRADING STOCK AND WORK IN PROGRESS

Question proposed, That the Clause stand part of the Bill.

Mr. David Howell: We on the Opposition side of the Committee are not going to oppose the inclusion of this clause in the Bill. Obviously, we welcome the continuation of the relief to firms which is contained in the Clause, as far as it goes. We now have an opportunity, at this very critical time, for the Committee to hear the Government's thinking, and their view on the profitability of industry and the investment situation. Of course, it hardly needs me to say that the investment

situation is extremely serious, and is getting very much worse. That alone emphasises the fact that if any relief is going in the Bill it should be very much welcomed.
There is now a really desperate need for the kind of reliefs which are partially generated by the clause. If, before yesterday, anybody had doubted that fact, his doubt would have been removed by the extremely serious and very worryng forecasts issued by the Department of Industry about the likely trend of investment in the coming year. The survey which was carried out by the Department of Industry appears to warn of the worst situation ever in the manufacturing sector for which, hitherto, the maximum reduction forecast since the survey began in 1965 had been 10 per cent., when 15 per cent. is now expected. This is vastly different from the forecast of 8 per cent. which the Department of Industry had made for manufacturing.
In a way the situation is even more serious than is implied by the figures I have given. The survey also covered distribution and certain parts of the service sector. There, too, the forecast for the drop in investment this year was 5 per cent., but the new forecast seems to indicate that the figure will be 10 per cent. That is particularly worrying. I have always believed that the great emphasis which Department of Industry circles place on the longer term decline in manufacturing investment did not take into account the fact that in distribution and services investment had held up quite well, and that employment in these areas had been growing and was expected to grow over the next five years according to Department of Employment predictions.
It seems that the Secretary of State for Industry, in banging the big drum on manufacturing investment, has overlooked the enormous contribution which the service sector makes to a modern economy and the enormous contribution which services like insurance and banking make to our overseas earnings. I think they generate, in gross terms, three-eighths of our total overseas earnings so that in the longer term one hopes that the strength of the distribution and service sector will be maintained and that the worries of the Secretary of State for Industry over manufacturing will be belied. In the short term, however, the figures from the Department certainly show a very nasty drop in investment, not only in manufacturing but in distribution.
If we move from forecasts to what has already happened, we see that the figures for the first quarter show that already in 1975 capital investment has been falling at what would be an annual rate of 6 per cent. in manufacturing and 11 per cent. in distribution. No one need have any doubts that the situation is bad, that it is getting worse, and that it is worse than Ministers foresaw or asserted when we adopted this measure of relief for stock appreciation last January and in the last Finance Bill.
This brings me to my first worry about the clause. Do Ministers realise that even in bringing forward this admittedly radical change—we shall come in a moment to the question whether or not it is permanent—how serious the situation is? If

they say that they do, our difficulty in believing them lies in the tone and the attitude of the Chief Secretary and others in past debates on stock appreciation relief. When we were discussing this matter in Standing Committee in January the Chief Secretary told us several times that he thought that the Government had gone "pretty far" and had not been unreasonable. He said:
We are providing many hundreds of millions of pounds for companies",
and when we expressed certain worries he went on to tell us that
we shall very soon be coming to the spring measures which will take into account all that has been said"—[Official Report, Standing Committee A, 29th January 1975; cc. 417 and 418.]
The words "all that has been said" included the very serious doubts whether the Government realised the extreme seriousness of the position of industry vis-à-vis its collapsing profitability and the appalling consequences which would follow for investment. Our first worry, therefore, is whether, in spite of having brought forward their measure last year and again in a sightly altered form later, Ministers realise what a critical situation is developing on the investment front. Nothing can make the position more stark or put it more clearly than the figures issued yesterday.
If one wants reinforcement about what has gone wrong and the desperate need for measures of this kind an interesting publication called "Finance for investment" from the National Economic Development Office spells out the appalling arithmetic in stark terms. I call the Chief Secretary's attention to it—although no doubt he has studied it very carefully—because it contains some serious home truths for his Department as well as for the Department of Industry.
Pages 63 and 64 spell out the situation which must have first brought home to Treasury Ministers how urgently they needed to bring in stock appreciation relief. The report shows all too clearly how, in a régime of a combination of high marginal tax rates and enormous discrepancies between measured profits and operating cash flows, and in a year of accelerating inflation
the taxing of corporate profits on the accruals basis of accounting can cause a situation in which internally generated cash flows are completely taxed away.


The report goes on to observe what we have seen to be true that
Once businessmen begin to perceive the fact that in an era of accelerating inflation all positive returns may be taxed away, because the effect of the accruals method of accounting on the measurement of assessable profits for tax purposes, they may be reluctant to invest at all
That is what is happening. One needs to look no further than this report to find the answer to the worries of the Secretary of State for Industry about investment in manufacturing. It says that as a result of the accelerating and now appallingly high rates of inflation, profitability is disappearing, and in the light of the greater inflation and other uncertainties it becomes impossible to devise investments which will be profitable and can therefore justify the assignment of funds for investment in the first place.
There is much more in this document from NEDO which tells us the same story, and it all adds up to the very urgent need for measures both of the kind in the clause and others, and, over and above that, the removal of uncertainty to revive investment in this country before it goes completely through the floor. That is the background against which we now examine the clause, and few hon. Members have any illusions about the seriousness of the situation.
As to the nature of the relief, obviously later, in Standing Committee, we shall be going into some of the technical details in the schedule, but it is important for us to examine the precise nature of the relief brought forward in the Bill and establish what it is. The first question is whether it is sufficient in view of the very strong indications about what the Government would come forward with in the spring Finance Bill.
7.30 p.m.
In January, the Chief Secretary said
What will be done in the second and later years the House of Commons will have an opportunity to decide when we have the spring Finance Bill.
He went on to say that
If we start using some of the relief which would otherwise have been available for certain companies this year"—
he is talking about the last financial year—
and allow it to be carried forward, it will get very confused with the relief, which may

be different—we do not yet know what it will be—which we propose to introduce in the spring Finance Bill."—[Official Report, 21st January 1975; Vol. 884, c. 1253.]
We certainly hoped that we would get on to new ground this year and move away from the rough and ready approach which is inherent in the present stock appreciation relief.
When the spring Finance Bill was introduced we learned that the changes were not going to be so very great. To be precise, the changes are that, as the Chancellor had promised, the relief is to be extended to unincorporated businesses and the companies which did not qualify for the relief last autumn, and that the formula will be used to cover stock increases over the two years rather than one only.
Furthermore, there was an additional soupçon. In his Budget Statement the Chancellor proposed that there should be, in his words,
a separate and further deduction from taxable profits equivalent to 5 per cent. of the amount of the stock relief itself."—[Official Report, 15th April 1975; Vol. 890, c. 302.]
Elsewhere the Chancellor described that as a generous bonus.
So that is the new element, and, of course, it is merely an addition to the continuation of the rough and ready scheme.
That is all very well as far as it goes, but what is desperately needed by industry now—the Chancellor made this point himself the other night—is some certainty about the new tax system and the new opportunities available, and the calculations on which they can decide how to identify investments which are going to produce a positive return with the present rate of inflation, present inflationary prospects and present interest rates. Therefore it is of critical importance for this debate this evening to establish the status of this relief now. Is it just a deferral again, this time not just for one year but for two years? The Inland Revenue Press handout of 15th April, after the Budget, said that the object of these measures was to give relief for stock increases covering a two-year period. Is it that, or is it permanent?
There is one aspect of something which the Chief Secretary said on Second Reading of the Finance Bill which I should


like to go over, because in a way it makes that question even more difficult to answer. He said:
We have ensured that there will be 5 per cent. of stock relief extra for small companies, professional people and traders.
Of course, he was referring to something I have already mentioned that the Chancellor had announced in the Budget speech. He went on:
That will not be a deferral of tax; it will be a full relief."—[OFFICIAL REPORT, 8th May, 1975; Vol. 891, c. 1748.]
I should like the Chief Secretary to make it absolutely clear that he is merely referring there to that 5 per cent. of relief to which the companies would be entitled had those companies been the ones that qualified in the autumn; that that is the full relief he is talking about, and that he is not referring there to the overall stock appreciation relief. I wish he were, because I think there is a great need to establish that this is a permanent arrangement. There is still doubt about it. I know that the Chief Secretary will point to what he said in January—that if inflation did not take a major turn downwards but stayed at one level there would be no question of any clawback of the relief, and the position would remain as it was, but the legal position and the position defined by the Inland Revenue is that it is now a two-year relief, and at the end of two years, unless something else comes along, as we hope it will, it will be automatically clawed back.
So we do need to know, in this Committee tonight—and we need to know, very precisely, as also does industry—exactly what the next step in this particular saga is going to be. I know the Chief Secretary's difficulties about the Sandilands Report, and waiting for further views and ideas following that, but the more precise he can be the greater service he will be doing to us, to the Chancellor, to his Government and to this country at large in removing some of the jittery uncertainty that still pervades industry even after the very encouraging referendum result last Thursday.
We should like to know as precisely as the Chief Secretary can tell us what the next step is. If he can say that this is now a permanent arrangement

or that the rough and ready system of last year and this year will provide a permanent arrangement which will be no less favourable, if he can say that that is, in the Chancellor's words, a bankable assurance—although I am not sure how much weight can be placed on that, but at any rate say it in very definite terms—it will be of great assistance to British industry in general. We and industry must know where we stand very quickly before we see even worse figures than those from the Department of Industry yesterday.
It will also be helpful for us to have the latest information on the Sandilands Report. When is it going to reach us? Has the Treasury got it yet? What is the time scale in which the Chief Secretary sees further comments and views and further legislation resulting from the Sandilands Report coming along? It will be useful to know all that, but the most important thing we must establish tonight is that despite our inability so far to move on from the rough and ready system of last year to something a bit more permanent, as we had hoped, in the spring Finance Bill, we now have a definite and assured prospect of reliefs no less favourable going into the future, during this era of high inflation, in order to make it possible to reach investment decisions of a kind which are now becoming very nearly impossible. We should therefore like to hear these things from the Chief Secretary on this clause.

Mr. Peter Hordern: I should like to follow my hon. Friend the Member for Guildford (Mr. Howell) in what he said so cogently and well on the position of companies, because the Government have changed their policy very much in the course of one year. A year ago the Government were proposing to put a surcharge on ACT. They said then that companies liquidity was in a good state. Since then they have altered that view and I think that the course of inflation has brought upon the Government a full realisation of the difficulties in which companies now find themselves.
There is, unfortunately, no relief yet in sight, because inflation is still proceeding just as fast as it was a few months ago. According to the latest figures, it is even escalating. Of course, we do not


know what will happen to commodity prices. It is certain that Government expenditure is still increasing very rapidly and so is the need to finance it through the borrowing requirement. Whatever the Chief Secretary may tell us—and I hope he will be able to tell us what the borrowing requirement is—it is quite clear that this is one feature that will keep inflation and the underlying rate of inflation growing the whole time.
These are not the only problems that face companies, as well as individuals in trade and industry, in the country at large. As my hon. Friend the Member for Guildford said quite rightly, it is not just that companies face difficulties in their investment programmes. We have all seen the latest figures from the Department of Industry about investment. It is also the problems that face them in financing their own stock, which are, of course, relieved by this stock appreciation provision, and even in deciding what their dividend policy should be. There is another factor, too, because as long as inflation proceeds, so long also will the real yield of corporation tax decline. That is becoming a very difficult matter already. If inflation proceeds at its present level, the stock appreciation provisions themselves will absorb the greater part of company so-called profits before tax.
I think this point has still to be generally recognised—and it does not appear to be recognised by the Government. The fact is that even if we get to the complete elimination of taxes and dividends, companies can still be left with a financial deficit in times of inflation. Stock appreciation is not matched, unfortunately, by a corresponding cash inflow. That is the position in which companies find themselves at present.
I understand that the latest financial statistics show that the effective rates of corporation tax after deduction of stock appreciation have escalated almost threefold. That is another way of saying that eventually we shall find ourselves on a zero corporation tax. That would mean that the whole of the private sector of profits had been eliminated and thus its taxable capacity exhausted. That is what will happen if inflation proceeds at its present level.
I know that the Chief Secretary will want to tell the Committee something about the Government's proposals for extending the stock appreciation relief. Industry needs to know where it stands. We can no longer listen to the excuse that we are waiting to hear what the Sandilands Report will produce. We are all waiting for that, but I do not think that it will be particularly good news to industry when it comes. I think I am right in recollecting that among the Sandilands Committee's terms of reference was a request for a recommendation in the light of no loss being made by the Inland Revenue. If there is to be any provision for inflation by the Sandilands Committee it must mean that those who have benefited through inflation will be paying a higher rate of tax. So there is no comfort to be drawn from the reflections of the Sandilands Committee.
We have seen recently some of the problems of companies. Not long ago the board of Coats Paton, a large public company, declared its final dividend but said that it would pay no dividend at all. It did that because the element of stock appreciation effectively wiped out its chargeable profit and, therefore, if it had paid a dividend it would at the same time have had to pay the ACT element. In not paying the dividend it saved itself the ACT charge. If that is the position for Coats Paton—which is a major British company on which many poor and elderly people depend for their income because historically it is a high yielding stock—and if it abolishes its dividend because of fear and concern about the weight of corporation tax, how much will that process be repeated with other companies? Have the Government considered where the process might lead, and have pension funds and insurance companies considered the effect of this course? It could be very damaging.
I hope, therefore, that the Chief Secretary will not rest content with the provision of stock appreciation relief, valuable and helpful though that is, but will realise that it is essential to curb the course of inflation and that that is the Government's main responsibility. He can do that, as I have said before, by checking the growth of public expenditure.
One other matter which the Government could deal with is the profit level


of companies. So long as companies are restricted, not just in their investment, but in the levels of profit they can make by profit control, price control and margin control, so long will those companies remain uncertain about their future trading pattern. It is essential for the Government to realise now that it is necessary to transfer more out of consumption into investment, and the best way of doing that is to allow companies to be free of price control and margin control. The sooner that process happens the better. I do not think that would necessarily result in higher prices for manufactured and other goods. Competition would see to that. That is a comparatively easy and straightforward action that the Government could take, one which would be wholly beneficial to the economy as a whole, and I hope that the Government will also consider that aspect.
The impact of inflation on companies is so serious that it affects not just their stocks and their capacity to invest—which has already been badly damaged—but also the taxable yield, with which the Government should be concerned for the sake of the revenue and, more important, for the sake of the prospects of dividends for shareholders. We have already seen one serious example of a major British company declining to pay any dividend. If that happens, pension funds, insurance companies and other beneficiaries will find themselves in a serious position. The main responsibility rests with the Government, who should bring forward their proposals to deal with the Sandilands Report when it comes and, above all, accept their responsibilities for controlling inflation. That remains the main responsibility of the Government and it is one with which the Government have been very slow to deal.

[Mr. ARTHUR JONES in the Chair]

7.45 p.m.

Mr. Cope: This is not the measure that we were originally promised at this time of the year. It is an extension of a crude method of inflation accounting. Ministers have admitted throughout the debates that it is crude, and they have acknowledged it to be temporary. 'The Committee should approve the clause only if it is clear that it is an interim

measure and a step towards more sophisticated methods of inflation accounting.
We want to know when we shall see the Sandilands Report and, more important, when we shall get action on it. At present, it is still true—and the clause goes some way towards remedying it—that tax is being levied on phoney profits, particularly with taxation at its present level. They are profits which are phoney not only in regard to stock—which is taken care of almost entirely by this relief—but also in regard to other forms of assets which a company holds and which influence its stock level.
It is difficult to finance a company's activities in this time of fierce inflation. Even just to keep going is extremely expensive. One has only to go into a shop and look round the shelves to see what it would have cost to put the same goods on the shelves a year ago and what it costs now. The difference is the extra capital required by that business which it has to find from the bank or from its own resources but which it cannot possibly find out of profits. The difference is the extra resources it needs to finance that stock and to keep going. But what we do not see on looking around the shelves is the extra money required to finance debtors and all the other parts of the business which are less visible. This measure goes some way to help with stock but it does not touch on the other parts of the business, and for that help we have to wait and wait again for the Treasury to get to the point of making firm proposals.
To those difficulties are added the difficulties of uncertainty. There is enough uncertainty in business decisions these days not to have the added uncertainty of the tax régime being changed, as it will be in this respect, with no one knowing how it will be changed.
At the same time, I do not want the Chief Secretary to go away with the impression that speed is all that matters as we approach the major reforms which will follow Sandilands and which we hope will give this type of relief. If it is to be fair, the reform is likely to be complex and it should not, therefore, be rushed into when the time comes. On the contrary, I should like it to be studied by a Select Committee in the more elaborate


procedures which are used now and which are perhaps more appropriate than consideration in Committee of the whole House or in Standing Committee upstairs. It should not be rushed into but it should not be prepared behind closed doors. We need to start to end the uncertainty instead of just drifting on and missing one deadline after another. That is what seems to be happening at the moment.
There are some points on the relief which, no doubt, we shall discuss in greater detail when we come to Schedule 9 in Standing Committee, but I hope that the Chief Secretary will give an indication at least that the Government will be willing to consider points of detail. It is all very well having a rough and ready relief for a year, but here is a rough and ready relief for a second year. If it is to be continued there should be some willingness to try to improve it in Standing Committee.
In the first place, I think it important that we should introduce an option element so that taxpayers need not claim either the whole relief or no relief. At present that is the position. That is important to a number of different types of taxpayer—for example, certain taxpayers with overseas tax liabilities. But it is also very important to professionals and other tax payers who are involved in income tax which enters into this relief this year for the first time, the relief having previously applied only to corporation tax.
There is another point which arises from the position of those businesses which have been introduced for the first time this year—namely, the question of the allowance that was made to compensate them for the fact that they were not given the relief a year ago. This allowance was always promised and it consists, as has been pointed out, of an additional 5 per cent. But 5 per cent, is a meagre rate of interest to receive on stock relief of this kind in these days. That is also a point to which we shall no doubt return in Standing Committee.
There is one basic point which is vital and on which we need to be reassured this evening, as my hon. Friend the Member for Guildford (Mr. Howell) has said—namely, clawback, and the question whether this relief will be replaced by a relief which will ensure that there is not a mere postponement of tax but a perma-

nent relief. That applies to all the relief and not merely to the 5 per cent. That point is of additional importance now that income tax payers are brought into the relief for the first time. If it is a mere postponement, or if there is a danger of a mere postponement, many income tax payers will wonder whether they should take the relief for fear of bunching their income into subsequent years. They may well decide not to take the relief for that reason. However, if they have a reasonable assurance from the Chief Secretary, which I hope we shall have this evening, they will not have that fear before them.
This relief started as a rough and ready measure. It is drifting, as did income tax, from being a temporary measure to becoming a permanent measure. We hope that it will not become as permanent as income tax. We hope that it will be replaced by a more sophisticated measure. We would like to know very much when that more sophisticated measure will be introduced.

Mr. Cecil Parkinson: I shall briefly endorse some of the remarks which have been made by my hon. Friends on the clause. We had a series of debates earlier this year—it seems like a decade ago instead of a few months—and at the time the Chief Secretary got away with a great deal by the use of his apparently limitless charm and by his admission that this was a rough and ready relief. The right hon. Gentleman accepted all our criticisms, suggestions and advice. He told us that he would like to make the relief better but that it was only a short-term measure. The right hon. Gentleman's claim that it was a rough, ready and immediate measure was the answer to most of our questions.
At that time my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) and I raised with the right hon. Gentleman the point that my hon. Friend the Member for Guildford (Mr. Howell) has mentioned tonight—namely, that many companies would be deterred from making the claim until they knew whether they were to face a clawback at a higher rate than the relief they had received.
In reply to the brief debate that we had on that issue, the Chief Secretary said that he could not give us a copper-bottomed guarantee but that he could


give us a bankable assurance that the relief would run on. Many people drew the conclusion that they could expect something to be embodied in legislation which would assure them that in future they would never have more clawed back than the relief they had actually obtained. It is said in a letter dated 12th May from the company whose letter I quoted earlier this year that once again we are in an uncertain situation. The Chancellor has admitted that he seriously considered raising corporation tax in the Budget. The Chancellor did not do so, but even now that company could face the prospect of having the relief clawed back at 52 per cent., having received relief of only 46 per cent.
I am saying to the Chief Secretary that this rough and ready device, which we all accepted and which has been useful to many companies, will cause many uncertainties if it is to continue for any lengthy period. I serve notice on the right hon. Gentleman that in Standing Committee I shall he moving a number of amendments which will have roughly the same intentions behind them as those amendments that we moved on the Floor of the House, and that this time we shall not accept that the measure is rough and ready as an excuse for not having the necessary refinements.

The Chief Secretary to the Treasury (Mr. Joel Barnett): I found the reaction of the hon. Member for Guildford (Mr. Howell) to the clause somewhat strange. If he can be as churlish and as miserable as he was in accepting the clause, I shudder to think what his reaction might be if he were to oppose it. However, I take it that despite his worries he welcomes the clause. I am obliged to him for that.
I shall deal with the various points that have been raised, but I think that it is generally recognised that the clause provides, as we promised, substantial relief not just for the bigger companies, or companies with stocks to the value of £25,000 or more, but for small traders, partnerships, professional firms and the rest. It is a very substantial relief. It means that the total relief over the two years—not all of it will be able to be used in the two years and some of it will have to be carried over—will be, as I said on Second

Reading, £3,795 million. In 1975–76 it will be £1,300 million.
8.0 p.m.
Statistics are often quoted about levels of corporation tax, and the rest, compared with other countries. In practice in this country we have high levels of capital allowances and first year reliefs of 100 per cent. That does not apply in many countries, We now have substantial relief on stock. The true level of income tax is now very much lower than it was previously. I accept the point made by the hon. Member for Horsham (Mr. Hordern). The problem for everybody is the rate of inflation. At present we have to deal with the situation as it is and see how we can help companies and small businesses by providing them with some relief for the situation that now exists.
It is fair to point out that the relief we have given recognises the acute liquidity problems which are faced at the present time by businesses of all kinds. It is recognised by most business men that the stock relief is of substantial benefit to them in current circumstances. I am aware of the problem of uncertainty and I shall come to that point a little later.
The hon. Member for Guildford referred to his concern—a concern which I share—about the level of industrial investment. Everybody is concerned at the figures, which indicate a decline in investment. However, in fairness, it is right to say that last year was a good one for growth of industrial investment. It might also be pointed out that the previous couple of years were bad in this respect, although not as bad as has been said. Equally, it is fair to say that not all investment is necessarily good. I agree with the hon. Member for Guildford that sometimes investment in the service and distribution industries is as good as, if not better than, certain types of manufacturing investment and certainly as important. I would not necessarily say that we want to encourage only manufacturing industry, for we want both.
From the liquidity standpoint, this stock relief, which gives £1,300 million of additional liquidity to companies, small businesses, and also to the self-employed, will at least deal with one aspect of the problem. However, I do not think that


is the reason why companies are not investing. The reason is that they fear that the extra goods which they will produce from that investment may not be sold. This is a problem that always exists and it is the reason why people do not invest. Even when we gave 40 per cent. investment grant, companies were still not investing. Companies must feel that the investment is worth while and that they will be able to sell the goods produced.
I hope that the result of the referendum will be helpful in improving confidence in industry and in making it see the continuing opportunities for sales in the Community. But industry will want to see an upturn in trade at home and abroad. There is every sign that there will be an upturn in world trade. Therefore, we can expect to see a return of confidence. We have ensured that there will be an improvement in liquidity. The two together should ensure some improvement in investment.
I turn to some points related to the clause. I was asked about the additional 5 per cent. bonus on stock relief. The hon. Member for Guildford asked whether that relief—which, it has been said, is not a deferral but a full relief—applies to the rest. It does not apply to the rest, but applies only to the 5 per cent. bonus given because were were unable initially to provide the relief for those firms with stocks of less than £25,000. This was an additional benefit and we felt it right to give it as a full benefit rather than a deferral.
I turn to the central problem which has been referred to by most speakers in this brief debate—the fact that we have been unable to come to the more refined and sophisticated form of stock relief that we wanted to see. The hon. Member for Gloucestershire, South (Mr. Cope) made my case for me. He appeared to argue that because the Sandilands Report was likely to be complex we should not rush into anything. Indeed, he suggested that we should have a Select Committee to consider that report once we get it. But if we had had that report when preparing the Budget, and if we had followed the hon. Gentleman's recommendation, we could not have used that report for any relief in the Budget.
I agree that the area of inflation accounting is complex. There have been many reports on this subject. The Institute of Chartered Accountants has issued a number of documents on the topic. I do not yet know what the Sandilands Committee will say. I hope that the report will be available shortly, although I cannot say when. I hope that it will be available in time for the occasion when we consider the next form of relief.
I recognise that the first year's relief is a rough and ready form of relief. I also recognise the concern felt by all kinds of industry that the additional relief will affect individual traders in payment of income tax. Therefore, they will be concerned with whether they should take the relief. I am aware of the problems of uncertainty, but we wanted to do something rather than look for yet another refinement.
I hope that it will be recognised that to have a full relief rather than a deferral would be to go much too far. It would mean that a company or business would obtain substantial relief for a short period of time, and that if the company were to go out of business and realise the full value of the stock, it would pay no tax whatever on that profit stock. That cannot be right.
I come to the concern expressed by many people about the permanency of the type of scheme to deal with stock relief. I cannot do better than to repeat what I said on an earlier occasion because I want to reassure industry on this matter. Now that the basis of stock valuation has been altered, it is extremely unlikely that it will be possible to go back to the old system of cost or market value. That would create a difficult situation for industry. That is why the Inland Revenue, before any such system existed, was keen to ensure that the stock was valued on the same basis for opening and closing periods—otherwise the whole basis of the profits can be changed. One realises the difficulties. To the extent that we cannot go back to the old system, some form of stock relief will be permanent. That is inevitable as long as inflation persists. Clearly, if inflation declined the situation would change.
I regret that I cannot help the Committee. I do not have the Sandilands Report. The Committee would want me


to take account of its recommendations before devising a new form of stock relief. That must be reasonable. Therefore I very much hope that the assurance I have given will be of some benefit to industry. Every company will have to take advice from its accountants and other advisers whether it should claim the relief. It is clear that in the great majority of cases the relief will be claimed, because the indication we have is that it will reduce the tax yield by £1,300 million. I assume that the majority of companies will take advantage of this relief.

Mr. Peter Rees: Will the Chief Secretary say whether he will look kindly on an amendment, which the Opposition might be tempted to table in Committee, to allow a company to claim only part of the relief? As I understand the position, the companies must claim all or none. Perhaps the Chief Secretary will look with favour on an amendment on those lines.

Mr. Barnett: I intended to deal with a number of details raised by the hon. Member for Gloucestershire, South. These arise on the schedule. I have taken careful note of the points made by the hon. and learned Member for Dover and Deal (Mr. Rees) and by the hon. Member for Gloucestershire, South. I shall give them serious consideration when we come to the schedule. I am sure that the Committee would not expect me to go further than that now. I recognise that these are points of substantial detail and shall give them serious consideration.
A number of hon. Gentlemen raised the problem of inflation. This point was made by the hon. Member for Guildford and the hon. Member for Horsham and Crawley. I would have preferred, as would they, not to deal with this question by means of stock relief and not to experience the present level of inflation. It does not mean that because we are dealing with inflation accounting through stock relief in this way we do not also have to deal with the problem of inflation.
Even though we are giving relief to companies' stocks from the effects of inflation, that does not solve problems caused by inflation which are faced by

companies. I refer to the problems of what will happen to sales and costs during next year or during the weeks and months immediately ahead. I am aware of those problems faced by companies. Apart from the relief given to companies, small businesses, the self-employed, partnerships and others, we are determined to ensure that the rate of inflation is brought down. That is a wider area than that of Clause 49. I would not wish to stray into it too much now. I have no doubt that we shall have many opportunities to debate the rate of inflation, investment, and many other areas of the economy on numerous occasions in the next few weeks and months.
I express my gratitude for the acceptance of this clause by the hon. Member for Guildford, even if it was not as happy as I should have liked to see from him. That is perhaps too much to expect. Nevertheless I am grateful that he is prepared to accept the clause.

8.15 p.m.

Mr. David Howell: Although this is a debate on the Question, "That the clause stand part of the Bill," I hope that the Chief Secretary will not mind if I make one or two final comments on what he has said about this clause. I am sorry if he thought that my approach to this matter was churlish.
The Chief Secretary must realise that the Opposition accept that the Treasury Ministers have tried extremely hard in appallingly difficult circumstances to keep the ship afloat. The Opposition understand his exasperation with us and, no doubt, with some of his senior colleagues. As long as the Conservative Party is in opposition—I hope that that will not be for very long—it is our duty to press him to try harder. We are bound to do that in the light of the fact, which he cannot deny, that the results, in terms of the revival of business confidence and improved liquidity, and the revival of investment, are, alas for us all, still very poor.
I hope that his assurance tonight will be of benefit to industry. I hesitate to repeat it because I shall read his words in the Official Report. He said something to the effect that it was extremely unlikely that we should go back to the traditional forms of accounting for stock appreciation. That is an indication of


possibly a slight advance on the previous position.
We leave the Government in no doubt about the central and urgent importance of the matter we are discussing. The question for many firms over the next few weeks is whether they dare tie up funds in long-term investment which may be called upon suddenly to be returned to the tax man. Are the firms dealing with a deferral or a permanent adjustment which they can make in calculating their long-term investment projects. The country must know that very soon, if we are to reverse or check this catastrophic investment decline.
I leave the last word with the Report of the National Economic Development Council, which says on page 64 that there can be no question of alleviating the problem with once and for all taxation concessions in respect of stock appreciation, which I take to mean—indeed the report says as much in later stages—that the problem is far more serious, far deeper and more urgent than anything which can be met by this stock appreciation relief. If I sound churlish, that is the way I sound when I am worried. I am now worried about British industry and our present economic situation. We are all worried. I am afraid that our welcome for this clause is bound in the present circumstances to be reserved.

Question put and agreed to.

Clause 49 ordered to stand part of the Bill.

Clause 60

INTRODUCTORY

Question proposed, That the clause stand part of the Bill.

Mr. Cope: I do not wish to go into the whole principle of the clause, but there is one point, which is appropriate to be raised in Committee, concerning the appointed day.
I appreciate that the Treasury will not be able to give us a specific day, and that the clause provides for the day to be appointed by order. Owing to the wording of the clause, in the period between the passing of the Act and the appointed day, whenever that is, no one can apply for one of the old "lump"

certificates, and no one can be issued with a "lump" certificate if he has not applied for it before. This means that if there is to be any length of time between the passing of this Act and the appointed day there will be difficulties for those few people who, not having applied or having been issued with an old certificate, will not be able to apply under the new provisions.
I think that we should consider whether, on Report, the words "the passing of this Act" in line 14 ought not to read "the appointed day", so as to solve this problem by merging the two into one, thereby ensuring that there is no gap between the two periods.

Mr. Ridley: I cannot bring such a brief and presumably uncritical view to the clause as did my hon. Friend the Member for Gloucestershire, South (Mr. Cope). This and the following clauses set about stopping tax abuse, but the clause has implications for the system known as the "lump sum contract" which is common in the building industry and is becoming common in other walks of life and industry. I am concerned that in our desire to stop tax evasion we should be seen to be inimical to the system known as the "lump". I certainly am not.
I am glad that these clauses acknowledge that all tax abuses do not take place within the City. I imagine that there is some "lump" activity within the City. But hon. Gentlemen who suggested that this clause be taken on the Floor of the Chamber did so because they had a dislike of the "lump". However, having come to the point, they do not appear to have turned up to press upon the Committee the reasons why they support the clauses and want to see the "lump" damaged.
Tax evasion is very widespread. The revenue lost by devices such as the "lump" among those who are on relatively modest incomes exceeds by many hundreds of times the yield of devices which we seek to stop up by complicated clauses in Finance Bill after Finance Bill. I sometimes think that we would do better to spend more time in seeking to collect the tax which is blatantly avoided by ordinary working people in terms of collecting revenue. At least I must give a grudging welcome to these clauses, as


that is their objective. However, I do not think that I can go any further than to commend the objective of stopping up a tax loophole.
I see two defects in the clauses. The first is a matter of principle. It is totally wrong to require one citizen to be the tax collector on behalf of another with whom he has no relationship other than contractual. Our society has accepted that if people employ others they can be made responsible for collecting the tax on their behalf. Even where a person sells something, he can be made responsible for collecting the tax on behalf of the Revenue through value added tax. But that every time we enter into a contract, however small, we should be expected to pay the Revenue tax on behalf of the contract, which is the basis of these clauses, seems to be going a bit far.
One of my constituents, a builder, let a subcontract to a "lump" concern. He failed to make sure that he had a certificate or to deduct the tax from the payment. He was taken to court by the Revenue, quitely rightly under the law. Finally, he was fined and that bankrupted him. His omission to collect tax on behalf of the Revenue was his financial undoing. It seems a terrible state of affairs that that kind of thing should be allowed to take place. Under the revised anti-"lump" clauses the situation will be much worse.
My second objection, which is not so much a matter of principle as of administration, is that it will be extremely difficult to collect this money from private individuals who have their houses painted or have work done on their properties and are not large and registered businesses in the sense that builders are. There must be countless occasions when people have work done on their farms, houses, factories or wherever it may be in Circumstances in which somebody comes along and says "Yes, I will do the plastering, the painting or the bricklaying. Give me £500 in notes and I will appear at 10 o'clock tonight and by breakfast-time the work will be done." According to the clause, the employer ought to deduct 35 per cent. and give it to the Revenue.
What will the bricklayers and plasterers say? They will say "This is subject to your not deducting 35 per cent. or telling the Revenue about this little transaction.

It is all fair and between friends within these four walls." Indeed, it is the building of the four walls which is the concern of the clauses.
The clauses will provide an added incentive to tax evasion by both the employer and the employee. It will be impossible to check on the many breaches of these clauses that will take place. To that extent, this seems to be another example of building into our tax law heavier penalties and stricter and stiffer rules on those who have consciences and honour and seek to obey the law on all occasions while letting those who do not have the same respect for the law get away with it time and again. That is dividing the nation into two groups—those who scrupulously pay their taxes and those who indulge in evasion.
I know that the Treasury has tried for many years to find ways of stopping evasion, but it cannot succeed in those areas where groups of workers are determined to outstrip fellow workers by setting up these little cells of private enterprise, whether one-, two-, six- or ten-man bands. That is the only way to operate in a tax environment which is so unfriendly to private enterprise that there is an incentive to continue by evading taxes of this kind. The activity engaged in by such groups is so laudable that it does not seem right to confuse it with tax evasion and to present it as something despicable and to be disliked.
There is one rule in Parliament which I have learned to follow in the past few years—namely, that whatever makes the hon. Member for Liverpool, Walton (Mr. Heffer) fume is, prima facie, a good thing.

Mr. John Biffen: No.

Mr. Ridley: I hope that my hon. Friend will speak for himself. I wish the hon. Gentleman were here to fume and to come trumpeting into the Chtamber telling us of the evil and wickedness of the "lump"—as I have heard him do on so many occasions—and suggesting that the "lump" is somehow purely and simply a way of avoiding taxes. He confuses, in all he says on this subject, the two issues of the avoidance of tax and the fact that workers are prepared to form co-operatives, whether large or small, to run their own businesses and to contract on their own behalf, and furthermore to contract out of trade union membership.


What the hon. Gentleman really dislikes—I hate having to make a speech about him in his absence, but that is his fault, not mine—is the evasion of the trade union's grip upon workers.
The hon. Member for Walton and I were both in the building industry, so we know how these matters work. He has experience of trying to unionise workers in the building industry. He sees this, quite rightly, as do others who hate the "lump", as the major evasion of the monopoly power of organised unions.
Why is it that people want to engage in the "lump", leaving aside tax evasion purposes and assuming that that is stopped up either by past legislation or these clauses? The only motive can be that it is more lucrative to engage in lump sum contracting than to be employed by a reputable contractor with all his overheads, union membership, membership of the federation and all the trammels that surround the private enterprise world that has got caught in the web of Whitehall.
8.30 p.m.
Therefore, prima facie, it proves that to opt out of the union and the establishment—the mould in which the private sector has become set—will be more lucrative to the employees. To those who say that trade unions are the cause of wage increases and that Britain suffers from inflation generated by militant trade unions demanding high wages, I answer "Why do workers seek to evade unions, form little firms and groups in order to pursue their own interests through lump sum contracting, and why do they find this more profitable?" It is more profitable because they know that rewards are matched to the work they put in. They know that if they work 12 hours a day they will get commensurate rewards. The added bonus of tax avoidance is present. I should not like it to be there and I do not think that anyone should avoid paying taxes, but it is not the real reason.
The real reason is that they are their own masters. They are able to connect reward with work and they are able to avoid the restrictions and restrictive practices placed upon them by unions. Here is the living proof that the effect of trade unions is to hold wages down in this country—something which I have for long

maintained and which more and more workers are beginning to realise.
In this clause we should not seek to make it more difficult to form co-operatives. Here I am, perhaps, in the unwonted but not unwanted posture of defending co-operatives against an oppressive Labour Government who seek in these clauses to quash them. These are examples of co-operatives. They are primitive examples of private enterprise cells. I say "primitive" simply because they do not at their behest have large sums of capital.
The tools of the plasterer or the bricklayer are his capital and these in relation to labour are but a small proportion of the cost of the subcontract. Therefore, we want to see the development of more such co-operatives which can, to a greater and greater extent, command capital resources which they would hold, presumably, in equal shares. That, for the benefit of Labour Members, is the origin of the word "share". They would become shareholders and this would be entirely in accord with what my hon. Friend's at least in the past, have always believed in and what I still believe in.

Mr. Parkinson: Does my hon. Friend think that in due course something called a co-operative share exchange or market might gradually emerge, and that people might start to sell their shares in their co-operatives?

Mr. Ridley: Yes, I think it might. At the beginning it would have to be a black share market. Both the Labour Front Bench and my own Front Bench might say that this would be illegal. It would be deemed to be a thoroughly wicked activity, against the counter-inflation policy of the time, and, as such, it would require some liberating radicals such as my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) to break aside the shackles of officialdom and let this market flourish in the open.
I shall vote against the clause not because I am against stopping up tax loopholes but because it is time the Committee demonstrated in favour of the "lump". We should support the principles that underline it. If the Government want to stop tax evation devices, for which they will have my support, they should do so by collecting tax from the citizen rather than collecting it in


a way which is arbitrary and unfair from those with whom the citizen does business.
I turn, in conclusion, to the tax evasion point. Because the "lump" has been made out to be something disgusting, almost sub-human and something which should shock the conscience of every decent Social Democrat on the Labour benches, it has been assumed that really rough methods of taxation—crude fiscal weapons—are justified in order to level it.
None of us in this Chamber, as individuals, would put up for a moment with the suggestions as to contract and taxation contained in Clauses 60, 61 and 62, but, then, we do not share the obloquy of those who are said to be members of the "lump". I suspect that this crude, unsophisticated and harsh way of seeking to collect tax is permissible only when the group of people who are avoiding tax are thought to be parasites on human society, so by elevating them into paragons I believe that these methods of taxation are not acceptable. The way to express that feeling is for me to express my dislike for this clause in the Lobby tonight with as many of my hon. Friends as will join me.

Mr. Parkinson: When my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out that he and the hon. Member for Liverpool, Walton (Mr. Heffer) had both been in the building industry, I had visions of my hon. Friend shovelling sand into the wheelbarrow of the hon. Member for Walton on some rather unlikely site on neutral ground somewhere between the North-East and Liverpool. Although I agreed with everything my hon. Friend said then, that was the only time when I thought he was pulling our legs.

Mr. Ridley: No. It is true.

Mr. Parkinson: I declare an interest in that I am involved in the building industry, but not in "the lump"—except as the chairman of a company which employs "lump" workers. It is extraordinary that in this debate, which was chosen by the Government and in which we all expected the hon. Member for Walton to be the starter, in which we expected to hear great attacks on "the lump" and lurid statistics about accidents

caused by "the lump", none of the Government's supporters has appeared, and it has turned into an occasion on which we in this Chamber join in singing the praises of the self-employed and of the contribution which "the lump" makes to the British construction industry.

Mr. Ridley: It may be that Labour Members are waiting close to telephones connected to 10 Downing Street, which I am certain is where the hon. Member for Walton is.

Mr. Parkinson: That is an even less likely picture than the one my hon. Friend conjured up a few moments ago.
Many of us who had sympathy with the ideas of tightening up the tax system and making sure that tax is paid by self-employed building workers, recognising the fact that there needs to be a machinery for collecting this tax, have our doubts about this set of clauses. They are extremely swingeing. It seems to us that they are aimed at reinforcing the misconceptions of the Left. These clauses are to quite an extent—because they are far too swingeing to be necessary—just the Chancellor's little tit-bit for the Left in a Budget which did not perhaps contain as much for them as he would have liked to give them.
We simply find it difficult to understand the paranoia which people such as the hon. Member for Walton have about self-employed workers in the building industry. "The lump" is a rather nasty expression which has been evolved to describe tens of thousands of honest craftsmen who make a major contribution to one of our most important industries. The offence which these people have committed is that they have decided that they would like to stand on their own two feet and work for themselves. They do not want to have anybody guaranteeing them a minimum wage. They are prepared to be paid what they are worth and they are prepared to work very hard for a very good income.
This seems to be offensive to Labour Members. They feel that people simply should not have that sort of instinct. So we have first of all, as a criticism from the other side, the fact that many people


want "the lump". As my hon. Friend said, the workers would rather be paid by their merits, earn what people are prepared to pay them, and be judged by their results, than lean on the guaranteed minimum week, the statutory minimum wage, overtime and fiddled tax expenses. They simply prefer to work for themselves.
In the industry employers find this extremely useful. They can get a firm price for a particular job. As a result, they can give a firm price to the customer. The customer likes it. The customer gets the product at a price which he knows will be firm. The employer likes it because he knows that once he is given the job it is the man's responsibility to get it done for that price. The man likes the job because he knows that if he does it well and works hard he can made an income well above average.
There is no evidence of any kind that "the lump" causes an increase in accidents. That is another myth which the Left likes to put out about self-employed building, workers. Self-employed building workers take a great deal of care to make sure that they do not hurt themselves. They do not take risks because they know that there is nobody underwriting next week's wages if they have an accident. The position is exactly the reverse of the normal claims about "the lump". It suits the customer, it suits the builder, and it suits the men doing the work.
There is one group that it does not suit—UCATT, the building industry trade union, especially a tiny group, the organisers of that union. They resent "the lump" like mad because, as my hon. Friend said, members of the union are working on a site and seeing other men who are happier, earning more, and getting on with their job without interference. This is distasteful to the organisers of labour, especially in the building industry, so we have to go through this rigmarole of making a firm such as Wimpeys register because from time to time they are sub-contractors.
Forty thousand companies, including Wimpeys, will have to justify that they are viable commercial entities before being allowed to sub-contract to anybody. What a nonsensical suggestion it is. These are companies which have existed for

decades and which employ thousands of people. They are companies with huge reserves and an impeccable record. They have to apply and prove to some bureaucrat that they are to be trusted before being allowed to sub-contract. This is the sort of price the Chancellor of the Exchequer is prepared to pay to reinforce the misconceptions of the Left.
I do not find this clause particularly objectionable. We ought in Committee upstairs to be able to do quite a lot to improve the schedule. What I do not like is the motivation behind this legislation—this idea that anybody who feels that he would rather be judged by his results and earn his living according to them is in some way to be regarded as an anti-social, untrustworthy person.
I accept that a tiny minority of self-employed building workers evade tax, and I am very happy for the Government to make arrangements to stop that from happening, but I warn the Government that any attempt to interfere with the self-employed building worker and with "the lump"—any such attempt should be resisted by all Members in this House—would be bad for the industry and bad for the customers of the industry. Anything which is, at the end of the day, had for the customers of the industry can only have very dubious effects on the livelihood of the employees working in that industry.

8.45 p.m.

Mr. Biffen: I think that all contributions to this debate have contained a toast to absent friends, and I should like to join with those of my honourable Friends who have deplored the green acres of the benches opposite in some bewiderment.
Presumably the question of sub-contracting in the construction industry was one which exercised a great deal of anxiety on the part of a number of hon. Members—and not merely the Left, because the opposition was quite well sustained throughout the various elements of the Labour Party, and I must confess that, if these clauses were some concession to the Left wing of the Labour Party, I have received no earnest representations from the CBI saying that these measures should be hotly contested. I have the suspicion that, among the moguls of the larger elements of the


building industry, there is tacit acceptance that in the best of all possible worlds it may be that matters should be organised on large-scale units.
What my hon. Friends are probing is the possibility of the emergence in this country of a new form of self-employment. The clauses with which we are concerned deal only with the construction industry. But we should be unwise if we supposed that the practice of contract employment was confined merely to the construction industry. There is already burgeoning evidence that it happens, for example, in the provision of secretarial services, among draughtsmen and in respect of the transport services. I quote only three examples which have occurred to me at random as I have listened to this debate. But this clause concerns only the construction industry because it is in that industry that there has been the biggest and most sustained political pressure that measures should be taken of the kind embodied in Clause 60 and Clauses 61, 62 and 63.
It is fashionable to deplore the economic performance of this country. But those of the public at large, especially the commentators in the so-called quality Press, who spend much of their time berating our economic performance, would do well to spend a little time in the United States of America seeing with what success the building and construction unions in that country impose highly restrictive conditions upon the American economy. The contrast with what happens in the United Kingdom would be pre-eminently to our advantage. One reason why it would be to our advantage is the growth of self-employment in the construction industry.
My hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley) and for Hertfordshire, South (Mr. Parkinson) are correct to say that what they question is the motivation for this clause. Of course, there can be no question of any Opposition Member condoning tax evasion. Of course, we are anxious to devise legislation which will secure as far as possible the equitable contribution of all to the national Exchequer. But the motivation behind this clause is not merely concerned with the tax abuses

which have been related to "the lump". There is the fear that the growth in self-employment is imperilling a union stranglehold or a union dominance in a specific industry.
Indeed, that is the background to some of the scenes of the most extraordinary violence which took place in Shropshire a few years ago on the occasion of the building workers' dispute. I shall not, by a side wind, drag in my personal knowledge of what occurred in the Shropshire building dispute which has been the subject of the Shrewsbury trial and the imprisonment of the two supposed martyrs. However, part of the violence and the feelings that were released by that dispute were related to the substantial extent of non-unionised and "lump" working in the construction industry.
It is perfectly true that there are legitimate grounds for protecting working conditions in the construction industry both in respect of safety and of training. However, those are measures which could be wholly consistent with a wide degree of self-employment and contract working within the construction industry.
I suspect that the arguments about training are just one more aspect of a restrictive practice. Blue collar unions have only to turn to white collar and professional occupations to acquire a speedy apprenticeship of the way in which supposed training requirements can be a technique of restriction on entry.
It is one of the happier aspects of our industrial and commercial society that there has been a growing development of self-employment. This is the point of expanding freedom in the economy. This is the point one looks to for hope, rather than to the corridors of the Confederation of British Industry. In that sense we are happy to champion the new selfemployed—the building workers, those on the books of agencies providing secretarial services and the self-hire lorry drivers.
As my hon. Friends have said, nothing with our voices or in our votes must be construed as condoning tax evasion. However, on account of the configuration of union restraint and high levels of direct taxation, self-employment will flourish. That will be as inevitable as night follows day.
The more that this country is committed to levels of public spending which necessitate high levels of taxation, the more will society adjust itself in response to that situation in forms such as self-employment which has certainly proved far more attractive when it comes to defying effective taxation. The hon. Gentlemen on the Treasury Bench will once again be faced with the dilemma of resolving whether, in order to secure a more equitable incidence in the payment of taxation, they will be obliged to nudge taxation more in the direction of indirect taxes than income taxes.

Mr. Robert Edwards: Will the hon. Gentleman explain the very high percentage of bankruptcies among the self-employed in the building industry, which is higher than in any other sector of our economy?

Mr. Biffen: And it always has been, because of the very cyclical nature of the building industry. The high incidence of bankruptcy has not come with the growing practice of "lump" labour. It has existed almost since the dawn of time in the building trade.
I believe that the Financial Secretary and I probably share an instinctive feeling that our balance of taxation between direct and indirect already loads quite enough on indirect taxation. Here I probably speak in a minority on this side of the Committee. On the whole, I do not wish to see taxation further loaded in the direction of indirect rather than direct. But if we have such high levels of public spending as we have now, there are almost inevitable consequences of the sort I have just described, which may force Treasury Ministers reluctantly further to load our taxation system in the direction of indirect because that is the only effective way in which they will be able to collect their revenues.
It seems to me that the message from this debate is, first, that the Government should look again at the overwhelming necessity for an early reduction in the totality of public spending, and, secondly, that they should move very warily with regard to taxing self-employment, because there are plenty of examples that this is an area of growth in the economy which carries a message of hope for the nation.

[Mr. GEORGE THOMAS in the Chair.]

The Financial Secretary to the Treasury (Dr. John Gilbert): In replying to this short but at times impassioned debate, I should make it clear that no great new principle is involved in the clause or in Clauses Nos. 61 to 63, which go with it and which we shall discuss in detail upstairs. In 1971 the then Conservative Government introduced the special tax deduction scheme for the construction industry, and the principle of the 30 per cent. deduction started.

Mr. Ridley: The Minister must recognise that there can be a "lump" in politics as well as in building. Because one party or the other does something, it does not automatically commit all hon. Members to having been in full agreement at the time.

Dr. Gilbert: Far be it from me ever to attempt to commit the hon. Gentleman to agreeing with his hon. Friends on any issue. One recognises his hearty independence on this and many other matters, for which we salute him. All that I am saying—it is beyond controversy—is that we are not establishing any great new principle. It may well be that in 1971—I have not bothered to check—the principle was offensive to the hon. Gentleman, as it apparently is now. He may well have voted against it, or it may be that he has changed his mind since then. I do not seek to make a petty point, but I am saying that there is nothing new in what we are doing.
However, we are drastically tightening up the arrangements under the existing scheme, because they have manifestly proved inadequate to prevent tax evasion on a massive scale. There have also been faults of another sort, involving national insurance deductions and value added tax.
The main factors in the Government's scheme—to touch briefly on the other clauses to be taken upstairs—are that the existing tax certificates will be withdrawn at a date to be announced. The hon. Member for Gloucestershire, South (Mr. Cope) asked when the appointed day was likely to be. It will probably be around late spring next year. The


hon. Member expressed some concern on the question whether there would be a blank period during which genuine subcontractors could not obtain certificates. When he looks in detail at the effect of subsection (2)(b) he will find that his fears on that score are laid to rest.
9.0 p.m.
In addition to the withdrawal of existing tax certificates it will become much more difficult to obtain one of the new certificates—one of the objections which hon. Gentlemen opposite have raised. An applicant will have to have a clean history for both tax and national insurance purposes over the previous three years, and also show that he is running a bona fide business. This was one of the matters which seemed to concern the hon. Member for Hertfordshire, South (Mr. Parkinson) who also, unfortunately, is not with us at the moment. I do not seek to make a point of that. The hon. Gentleman was good enough to apologise to me for the fact that he had to attend a dinner downstairs. Possibly to set the balance even, I ought to point out that my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) was upstairs in Committee on the Industry Bill until about 7.30 p.m. and I have no doubt that he has had to make dinner arrangements. I would not be surprised if he has found it necessary to sustain his ample frame and therefore has been unable to join us, for reasons similar to those which led to the hon. Member for Hertfordshire, South being unable to be with us.
I really do not feel, as the hon. Member for Hertfordshire, South seemed to feel, that it is going to be difficult for firms like Wimpey and other big building contractors to prove that they are bona fide in business. Obviously, it is a minor irritant, but clearly it is something that will be settled without any difficulty whatsoever.

Mr. Lawson: In view of the requirement of a three-year record, what is the position of new entrants into the industry who cannot provide a three-year record?

Dr. Gilbert: It will be better if we look into all these things when we get upstairs and deal with Clauses 61 to 63.

All that Clause 60 does—I shall come to the details later—is to provide for the changeover date and permit the new conditions to have effect in respect of applications for certificates made after the Bill receives the Royal Assent. The deduction scheme will have to be extended to cover companies acting as subcontractors and agencies supplying construction workers. They will have to qualify for certificate if they are to avoid deduction—and, of course, there will also be substantial increases in fines for fraudulently obtaining or misusing certificates.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) commended the objectives of this part of the Bill in so far as they were dealing with tax evasion. I noticed that he slipped from evasion to avoidance, back to evasion, and then back to avoidance many times in his speech. He needs no instruction from me as to the significant difference between the two. Whatever Opposition Members may have felt about the motives that lie behind these clauses this is the principal cause for it, and it would be very dangerous to underestimate not only the sense of resentment that is engendered amongst honest members of the community at tax evasion but also the infection that it produces, that may lead to an undermining of fiscal morality generally in society. When people see one man getting away with it, and possibly boasting of doing so, people may think "If he can get away with it, why should not I?" I would hope that we would have the wholehearted support—I am sure we do—of all responsible Members of this House in anything that will lead to a reduction of tax evasion.
I take another point raised by the hon. Member for Cirencester and Tewkesbury. This clause is itself evidence of the fact that, whether or not he likes some of our other policies in the field of fiscal administration, we on the Government side of the Committee are not content to tighten up our system solely in respect of better-off members of society. We are also prepared to apply it quite rigidly among those who earn their living in the construction trade. The hon. Member for Cirencester and Tewkesbury referred to private householders. I can give him an assurance that the scheme does not apply to them. The rules apply only under


Clause 61(1)(b) to a contractor in the construction industry which, according to subsection (3) covers merely people carrying on a construction business. A private householder or similar person could never be regarded as carrying on a construction business.

Mr. Ridley: The Financial Secretary said that it was important to prevent tax evasion. Does he not concede the enormous amount of tax evasion which takes place through so-called "moonlight" painters, and people who do repairs and alterations for private householders on a lump sum basis without paying tax? What is he to do to stop that sort of evasion?

Dr. Gilbert: If the hon. Member has evidence—[Interruption.] The hon. Member may laugh, but I can assure him that if he has evidence of particular cases we shall look at them. If he has evidence of widespread evasion in these matters they will fall to be considered. I can assure him that all Ministers in this Government—I should be surprised if this were not the case with Shadow Ministers, too—are prepared diligently to prevent any widespread abuse in terms of evasion wherever it is found.
That is the principle motive behind the clause. I recognise that Conservative Members see all sorts of different motives which do not exist, and I detected a touch of the paranoia that they affected to see among some of my hon. Friends. The true purpose of the clause is to reassure honest taxpayers that their less honest neighbours are not getting away with it—

Mr. Lawson: Come off it.

Dr. Gilbert: Of course it is. It is to see that those who have been getting away with illegal evasion for many years have life made much more difficult for them. It is also designed to protect the Revenue. I take much pleasure in commending the clause to the Committee.

Mr. Nott: This is the last clause of this Finance Bill that we shall be debating in Committee on the Floor of the House. Of course the Bill will return on Report and in the meantime we shall be continuing our debates for several weeks upstairs in Committee. I do not think, however, that that is good enough reason for the Financial Secretary to say

that he will answer pertinent questions relating to the clause when we reach Standing Committee.
My hon. Friend the Member for Blaby (Mr. Lawson) asked what would happen in the case of a new entrant to the building industry. We should like to know the answer to that question. We are not seeking an immediate answer, but I am sure that as this is the Committee stage my hon. Friends would like to know the answer to a point that is relevant to the clause. If a new building firm is formed and it applies for a certificate, will it be granted one? It is as absurd for Wimpeys to have to apply for a certificate as it is wrong for a new firm to be denied one because it does not have a record in the files of the Inland Revenue.
As regards the suggestion that shadow Ministers—if that is what I am—might help in some way in policing the activities of those who do my hon. Friends' moonlighting—that is not our job. My hon. Friends were making the relevant point that one cannot get too far away from the facts of the situation. These are that everybody is under a legal obligation to file a tax return and, if he does not do so, the penalties are well known. We cannot pursue endlessly the line that everybody is by nature a tax-evader unless he proves himself otherwise. We cannot go too far down this road of requiring too many extensions to these deductions at source by those who are employing labour-only subcontractors.
It is ironic that this clause, which we are happy to have here in the Committee of the whole House, should have been chosen for debate not by us but by hon. Gentlemen opposite. It was not we who suggested that Clause 60 be debated on the Floor of the House. That proposal came from the Government benches because, as we thought, the Government were greatly interested in the problems of "the lump". But for reasons of which we are not aware, the Chamber has been virtually empty throughout the whole of this debate. There has not been a single Labour Member on the benches behind the Front Benches for about half the debate today. We are happy that that should be so, but we are surprised, since they asked that this be brought forward.
I am glad to see that the hon. Member for Liverpool, Walton (Mr. Heffer) has


come into the Chamber because I was a little concerned that in his absence his name has figured fairly prominently in these debates.

Mr. Heffer: I had in fact heard this, but in view of the fact that I have been in Committee upstairs practically the whole day I imagined that I was entitled to eat in the meantime. That is why I have not been in this Chamber except to make a protest at something that went on in the Committee upstairs. I think it is quite unfair for hon. Members to refer to other hon. Members when the former know damned well that the latter are in other Committees upstairs.

Mr. Nott: It is not any of my business. If the hon. Gentleman wants to eat his dinner instead of attending a debate on "the lump", that is up to him. However, since the hon. Gentleman has always played such a prominent part in these debates we felt that he might have wished to defer his dinner and to participate.

Mr. Heffer: This particular clause does not abolish "the lump". It is a Finance Bill matter. If it were going to abolish "the lump", which I want to see, I would certainly not miss the debate. But I am quite certain that this matter can be left in the capable hands of my hon. Friends. The hon. Gentleman need not waste his time trying to knock political spots off me because it will not work.

Mr. Nott: I am very pleased that the hon. Member for Walton is prepared to leave this matter in the hands of the Ministers of his own Government because his last appearance in this Committee was totally irrelevant to our proceedings. He came down to protest at the way his own Ministers—

The Chairman: Order. Perhaps the hon. Gentleman will return to the Question, "That Clause 60 stand part of the Bill".

Mr. Nott: If I may say so, Mr. Thomas—

Mr. Ridley: As one who is on the same Committee as the hon. Member for Walton (Mr. Heffer) and who has forgone eating his dinner in order to talk about "the lump", I think I might be entitled to ask my hon. Friend whether

he thinks that it would be a good idea if I were to make my speech again for the benefit of the hon. Member for Walton, because he should know that this debate has taken a very strong turn in favour of "the lump" and that, far from proposing that it be abolished, the Committee is proposing that everything possible be done to improve the chances of "the lump" flourishing and thriving in the future.

9.15 p.m.

Mr. Nott: I am most grateful for the way in which my hon. Friend has attended the debate. It is not for me to say which hon. Member is right to defer his dinner and which is right to attend the debate. I am grateful for my hon. Friend's intervention.
I am delighted that the hon. Member for Walton has returned because I was getting a little concerned about the parliamentary point that he was being so constantly referred to in his absence. I am glad that he has come back because when he bravely resigned from the Government he said that he did so to enable him to devote some of his time to the Shrewsbury pickets. I remember well what he said, and the question of the Shrewsbury pickets has arisen—

The Chairman: Order. I must ask the hon. Member for St. Ives (Mr. Nott) to remember that the same rule applies to the Front Bench as applies to the back benches. He must speak to the subject before the Committee.

Mr. Nott: With respect, Mr. Thomas, I am not going to debate the Shrewsbury pickets, but the matter is strictly relevant to the clause. My hon. Friend the Member for Oswestry (Mr. Biffen) referred to the events in 1972, and these were relevant to some of the claims made by the trade unions who wanted a change in the existing arrangements for labour-only sub-contractors. It is relevant to what we have been discussing. My hon. Friend raised the point, but I will leave it, Mr. Thomas, as you wish me to do so.
The hon. Member for Walton is, I believe, a carpenter by trade. I hope he will forgive me if I quote from a well-known poem which is relevant to the debate.

Mr. Heffer: I am a carpenter and joiner.

Mr. Nott: I am delighted to hear that. I quote from a well-known poem known as "The Walrus and the Carpenter" which is particularly relevant to the debate:
The Walrus and the Carpenter
Were walking close at hand;
They wept like anything to see
Such quantities of sand;
This was connected with the construction industry. The poem continues:
'If this were only cleared away'
They said, 'it would be grand!'
'If seven maids with seven mops
Swept it for half a year,
At this point they considered calling in contracting firms to give them a hand:
Do you suppose,' the Walrus said,
'That they could get it clear?'
'I doubt it,' said the Carpenter.
And shed a bitter tear.
Then they called in the oysters—the subcontractors:
But four young Oysters hurried up,
All eager for the treat:
Their coats were brushed, their faces washed,
Their shoes were clean and neat—
Just like the self-employed, the labour-only sub-contractors. I issue a warning to all labour-only sub-contractors to keep away from the hon. Member for Walton, because the final sentence of that well-known poem runs as follows:
'O Oysters,' said the Carpenter,
'You've had a pleasant run!
Shall we be trotting home again?'
But answer came there none—
And this was scarcely odd, because
They'd eaten every one.
That is precisely the situation that is occurring between the self-employed in the building industry and many of the trade unions represented by the hon. Gentleman which wish to destroy self-employment in that industry, and that is greatly to be regretted.
My hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley), Oswestry and Hertfordshire, South (Mr. Parkinson) all referred to the wider issues raised by the clause. We absolutely oppose any evasion of taxes which are rightly due. Intervention by the Government may be necessary to place some curbs on gangs of unscrupulous labour-only sub-contractors who are not abiding by the necessary regulations which are for the protection of the consumer. Of course we accept that, but there is nothing wrong in labour-only sub-contracting. In

most developed countries it is on the increase.
In the United States whole factories are now depending on self-employed men performing many services and much of the work on goods which are passing through the production process.
I wonder whether the hon. Member for Walton, and others who feel like him, can explain why it is that they are so keen on developing worker co-operatives in industry on the one hand and yet, on the other, seem to be antagonistic to the idea of men working for themselves and providing their own skills in particular industries. What, in the last resort, is the fundamental difference between the development of worker co-operatives in industry—something which I am not against—and men in the building and haulage industries, for example, selling their skills in a similar kind of way? May be in some other debate we may be enlightened on that point.
We believe that we should encourage men to be more independent. We should encourage them to start up their own businesses and to sell their skills on a free market. I welcome the move of taxpayers from Schedule E to Schedule D. That is something that I believe we should welcome. There is no reason for our setting our sights against this development because it is more difficult for the Revenue to collect the tax.

Mr. George Cunningham: The hon. Gentleman did not think that when he was in the Treasury.

Mr. Nott: I most certainly did. I have never changed my position on this matter. In building operations—probably Labour Members know much more about the industry than I do in many respects—specialisation and mobility are important. I understand that the labour-only subcontracting arrangements probably go back to the days of the building of the canals in the eighteenth century. That is from where the term "navvy" stems—namely, navigators.

Mr. Heffer: The hon. Gentleman refers to the self-employed labour-only sub-contractors and their skills, but is he not aware that this is precisely one of the arguments with which we are concerned? The labour-only sub-contracting gangs do not take on apprentices. They


do not train young people in their skills. If there is a tremendous growth of labour-only sub-contracting there will be no apprentices coming forward except, perhaps, through Government training centres or through local authorities. That is one of the arguments, and there are many others. I could speak about "the lump" at great length but I do not intend to do so tonight. The whole question of the training of young people for skills is knocked on the head by labour-only subcontracting. If it continues to grow I warn the hon. Gentleman and the Committee that in 10 years we shall not have the skilled people in the building industry that we shall require.

Mr. Nott: Surely the number of subcontractors in the industry will move up and down with the building cycle. I would very much anticipate that labour-only sub-contracting is sharply on the decrease at present. Clearly that must be the position. When the hon. Gentleman says that one of the arguments against this proposition is that apprenticeships are affected, I must point out to him that when labour-only sub-contracting was at its height—namely, in 1973—the number of people going into apprenticeships in the building industry was probably greater than ever before.

Mr. Heffer: No.

Mr. Nott: I have in front of me a document from the National Federation of Building Trades Employers. It says specifically that the federation recognises that one of the criticisms of "the lump" is that it is
inimical to the recruitment and proper training of entrants to the industry…".
But it goes on to say that in 1973 self-employment was at a high level—I am sure the hon. Gentleman would agree with that—and that the recruitment of apprentices reached the highest figure for many years. Many of the accusations that are made by the trade union movement do not stand up to examination.

Mr. Heffer: Mr. Heffer rose—

Mr. Nott: I shall let the hon. Gentleman interrupt in a moment. He is an expert in these matters.
The second point made by the trade unions is that such work tends to increase

industrial accidents. I do not know where the figures come from to support that. In the same document I am told that there is simply no evidence to support the criticism that self-employment leads to higher accidents. It is necessary in every industry, particularly the building industry, to improve the procedures so that accidents do not take place, but it is no use hon. Members making these claims unless they can be substantiated.
Of course we are against evasion and we wish to prevent it, but we do not want to bring about any decline in self-employment because we believe that it should be encouraged. I conclude by saying that we are in favour of a man selling his own skills, using his own tools and becoming his own employer—in other words working for himself.
In a previous Government I stood at the Government Dispatch Box and wound up noisy debates when the hon. Member for Walton and his hon. Friends were protesting at the situation and wanted the law strengthened in this respect. The Government have come forward with these laws, but many of my hon. Friends—and I agree with them—feel that in the last resort the motivation behind Clause 60 is not directed at the question of evasion. I was told by those who know the industry when I was putting forward the ministerial view not more than two years ago that as soon as the Inland Revenue caught up with the certificates, many charges would be brought in the courts, and that is what happened When people saw the severe sanctions which were being imposed, it was thought that abuses would stop. There was a difficult period which I remember very well—a period when there was no evidence that the Inland Revenue would catch up with these people.
But that period is now ended. I believe that Clause 60—and I personally will not be voting against it—has behind it as much the motivation to drive out of business more and more labour-only subcontractors as to tighten up the situation regarding the evasion of tax. We do not agree with that. We want to see labour-only sub-contractors, as long as they are reputable and doing a good job, prospering. That is the basic division that lies between us on the two sides of the Committee.

Question put, That the clause stand part of the Bill:—

Question accordingly agreed to.

The Committee divided: Ayes 189, Noes 28.

Division No. 224.]
AYES
[9.28 p.m.


Allaun, Frank
Fernyhough, Rt Hon E.
Oakes, Gordon


Anderson, Donald
Fletcher, Ted (Darlington)
O'Malley, Rt Hon Brian


Archer, Peter
Ford, Ben
Ovenden, John


Armstrong, Ernest
Forrester, John
Palmer, Arthur


Atkins, Ronald (Preston N)
Fowler, Gerald (The Wrekin)
Pardoe, John


Atkinson, Norman
Freeson, Reginald
Park, George


Bagier, Gordon A. T.
George, Bruce
Pavitt, Laurie


Barnett, Guy (Greenwich)
Gilbert, Dr John
Penhaligon, David


Barnett, Rt Hon Joel (Heywood)
Golding, John
Price, William (Rugby)


Bates, Alt
Gould, Bryan
Roberts, Albert (Normanton)


Beith, A. J.
Gourlay, Harry
Roberts, Gwilym (Cannock)


Bidwell, Sydney
Graham, Ted
Robertson, John (Paisley)


Bishop, E. S.
Grant, George (Morpeth)
Roderick, Caerwyn


Blenkinsop, Arthur
Grant, John (Islington C)
Rodgers, George (Chorley)


Boardman, H.
Grocott, Bruce
Roper, John


Booth, Albert
Hamilton, James (Bothwell)
Ross, Stephen (Isle of Wight)


Boothroyd, Miss Betty
Hamilton, W. W. (Central Fife)
Ross, Rt Hon W. (Kilmarnock)


Bottomley, Rt Hon Arthur
Harper, Joseph
Rowlands, Ted


Bray, Dr Jeremy
Harrison, Walter (Wakefield)
Sandelson, Neville


Brown, Hugh D. (Provan)
Hayman, Mrs Helene
Selby, Harry


Brown, Robert C. (Newcastle W)
Heffer, Eric S.
Sheldon, Robert (Ashton-u-Lyne)


Buchan, Norman
Hooley, Frank
Silkin, Rt Hon John (Deptford)


Callaghan, Jim (Middleton &amp; P)
Hooson, Emlyn
Silverman, Julius


Campbell, Ian
Howells, Geraint (Cardigan)
Small, William


Canavan, Dennis
Hoyle, Doug (Nelson)
Smith, Cyril (Rochdale)


Carmichael, Neil
Huckfield, Les
Smith, John (N Lanarkshire)


Carter-Jones, Lewis
Hughes, Rt Hon C. (Anglesey)
Spearing, Nigel


Cartwright, John
Hughes, Mark (Durham)
Spriggs, Leslie


Clemitson, Ivor
Hughes, Robert (Aberdeen, N)
Steel, David (Roxburgh)


Cocks, Michael (Bristol S)
Hughes, Roy (Newport)
Stewart, Rt Hon M. (Fulham)


Conlan, Bernard
Hunter, Adam
Stott, Roger


Cook, Robin F. (Edin C)
Irving, Rt Hon S. (Dartford)
Taylor, Mrs Ann (Bolton W)


Corbett, Robin
Janner, Greville
Thomas, Dafydd (Merioneth)


Cox, Thomas (Tooting)
John, Brynmor
Thomas, Ron (Bristol NW)


Craigen, J. M. (Maryhill)
Johnson, James (Hull West)
Thompson, George


Crawford, Douglas
Jones, Alec (Rhondda)
Thorpe, Rt Hon Jeremy (N Devon)


Crawshaw, Richard
Jones, Barry (East Flint)
Tierney, Sydney


Cronin, John
Jones, Dan (Burnley)
Tomlinson, John


Cryer, Bob
Judd, Frank
Urwin, T. W.


Cunningham, G. (Islington S)
Kerr, Russell
Wainwright, Edwin (Dearne V)


Cunningham, Dr J. (Whiteh)
Kilroy-Silk, Robert
Wainwright, Richard (Colne V)


Davidson, Arthur
Kinnock, Neil
Walker, Harold (Doncaster)


Davies, Bryan (Enfield N)
Lamborn, Harry
Walker, Terry (Kingswood)


Davies, Denzil (Llanelli)
Lamond, James
Watkins, David


Davies, Ifor (Gower)
Lee, John
Watt, Hamish


Davis, Clinton (Hackney C)
Lestor, Miss Joan (Eton &amp; Slough)
Wellbeloved, James


Dempsey, James
Lewis, Ron (Carlisle)
Welsh, Andrew


Doig, Peter
Lomas, Kenneth
White, Frank R. (Bury)


Dormand, J. D.
Loyden, Eddie
White, James (Pollok)


Douglas-Mann, Bruce
Luard, Evan
Whitehead, Phillip


Duffy, A. E. P.
Lyons, Edward (Bradford W)
Whitlock, William


Dunn, James A.
McElhone, Frank
Wigley, Dafydd


Dunnett, Jack
MacFarquhar, Roderick
Williams, Alan (Swansea W)


Dunwoody, Mrs Gwyneth
Mackenzie, Gregor
Wilson, Alexander (Hamilton)


Eadie, Alex
Mackintosh, John P.
Wilson, Gordon (Dundee E)


Edge, Geoff
McMillan, Tom (Glasgow C)
Wilson, William (Coventry SE)


Edwards, Robert (Wolv SE)
McNamara, Kevin
Woodall, Alec


Ellis, John (Brigg &amp; Scun)
Marks, Kenneth
Woof, Robert


Ellis, Tom (Wrexham)
Marshall, Dr Edmund (Goole)
Wrigglesworth, Ian


Evans, Fred (Caerphilly)
Marshall, Jim (Leicester S)



Evans, Gwynfor (Carmarthen)
Maynard, Miss Joan
TELLERS FOR THE AYES:


Evans, Ioan (Aberdare)
Millan, Bruce
Mr. David Stoddart and


Evans, John (Newton)
Murray, Rt Hon Ronald King
Miss Margeret Jackson.


Ewing, Harry (Stirling)
Newens, Stanley



Ewing, Mrs Winifred (Moray)
Noble, Mike





NOES


Benyon, W. L.
Howell, Ralph (North Norfolk)
Rees-Davies, W. R.


Bitten, John
Knight, Mrs Jill
Roberts, Wyn (Conway)


Boscawen, Hon Robert
Latham, Michael (Melton)
Rossi, Hugh (Hornsey)


Brotherton, Michael
Lawrence, Ivan
Townsend, Cyril D.


Budgen, Nick
Macfarlane, Neil
Wiggin, Jerry


Clegg, Walter
Miller, Hal (Bromsgrove)
Winterton, Nicholas


Come, John
Mitchell, David (Basingstoke)



Costain, A. P.
Monro, Hector
TELLERS FOR THE NOES:


Durant, Tony
Mudd, David
Mr. Nicholas Ridley and


Goodhew, Victor
Newton, Tony
Mr. Nigel Cawson.


Gower, Sir Raymond (Barry)
Normanton, Tom

Clause 60 ordered to stand part of the Bill.

Bill (Clauses 5, 17, 23, 25, 28, 49 and 60) reported, with amendments; to lie upon the Table.

Orders of the Day — WAYS AND MEANS

INTERIM BENEFIT FOR UNMARRIED OR SEPARATED PARENTS WITH CHILDREN (INCOME TAX)

Resolved,
That provision may be made for deeming payments of benefit under section 16 of the Child Benefit Act 1975 or any corresponding provision having effect in Northern Ireland to be, for the purposes of income tax, payments on account of allowances under the Family Allowances Act 1965 or the Family Allowances Act (Northern Ireland) 1966.—[Mr. Sheldon.]

Orders of the Day — VALUE ADDED TAX (TIME OF SUPPLY)

Resolved,
That provision may be made for amending section 7 of the Finance Act 1972 as from 21st April 1975.—[Dr. Gilbert.]

Orders of the Day — NATIONALISED INDUSTRIES

Ordered,
That the Select Committee on Nationalised Industries have power to examine the Reports and Accounts of the National Water Council and the Regional Water Authorities—
That the Select Committee on Nationalised Industries and any Sub-Committee appointed by the Committee have power to sit notwithstanding any adjournment of the House.—[Mr. Walter Harrison.]

Orders of the Day — ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Miss Boothroyd.]

Orders of the Day — DOOR-TO-DOOR SALESMEN

9.42 p.m.

Mr. David Watkins: I am grateful for the expressions of support by those hon. Members who are leaving the Chamber. It is always good to have expressions of support at the beginning of one's speech, because if one does not get them at the end of it, at least, one has

had the experience of having the cream on the top.
When I applied for the Adjournment debate on the subject of high-pressure, door-to-door salesmen, I was informed that there was at first some doubt whether that subject would be in order, because it was thought that there was a possibility that no ministerial responsibility would be involved. If that was the situation, clearly the subject would not be in order.
However, after consideration, Mr. Speaker ruled that this was a proper subject to be raised on the Adjournment, on the ground that as my right hon. Friend the Secretary of State appoints the Director General of Fair Trading, who, among his many other responsibilities, has a responsibility for dealing with and keeping an eye on the activities of door-to-door salesmen, this was a proper subject for debate. I am grateful for Mr. Speaker's ruling and I take this opportunity to say that I am also grateful for the advice which I received from Mr. Speaker's staff and from the Clerk of the House during the discussions which took place at that early stage on the question whether the matter was in order.
It would have been absurd if, for technical procedural reasons, this matter could not be debated in the House, because, as I shall be hoping to show during my remarks, there is a danger from the activities of these salesmen to every constituent of every hon. Member.
High-pressure salesmen on the doorstep have, like the poor, always been with us. Certainly, cases have been brought to my attention over a period of several years. During the past year or so there has been mounting evidence in the Press, on the television, and on the radio that these activities are developing into something approaching a national scandal.
The operations of high-pressure salesmen on the doorstep cover a very wide range of products and services. Domestic appliances and various things for use in the home appear to be a particular field in which there is activity. There is also activity in matters such as thermal insulation, although I am aware that following activities of local authorities and others recently there has been some reduction in that.
These activities apply very much to correspondence courses. In relation to that aspect of the subject, I had a case brought to my notice several years ago of a constituent of mine who, on his doorstep, had been talked into purchasing a shorthand and typing correspondence course for his teenage daughter. One of the unfortunate aspects of this was that no sort of assessment was made as to the young lady's suitability for such a course. The upshot was that she started the course and her father, as her legal guardian, was liable for quite a large sum of money, which had to be paid in advance. Sadly, after she had been following the course for a few weeks she found that she was not suitable for that sort of course and did not continue with it. Nevertheless, the money was committed to be paid and had to be paid. I remember them having very unsatisfactory correspondence with the company concerned, which was based in London.
I have reason to believe, therefore, not only from that constituency experience but on a wider level, that there is a substantial amount of this sort of persuasion of people, by unscrupulous talk on their doorsteps and in their homes, into taking up correspondence courses without any assessment being made as to their suitability for the courses and, therefore, their ability to complete them, although there is no hesitation in making sure that they are committed in advance to paying often quite substantial sums of money for which they receive no real return.
I want to be more specific and to relate the experiences of certain of my constituents who were subjected to high-pressure and unscrupulous methods in the selling of electric central heating systems. I shall devote the major part of my remarks to that.
One of the features of this sort of operation is that firms spring up suddenly as if from nowhere, and very often disappear as quickly as they sprang up. The constituents to whom I shall be referring dealt with a firm which is called North East Heating Supplies, which started trading in October 1973 from an address in Leadgate, a town in my constituency. The firm then moved on to an address in Stanley, another town in my constituency, and has subsequently moved yet again to an address in Lanchester, a town in the adjoining constituency of my hon. Friend

the Member for Durham, North-West (Mr. Armstrong).
I ought to inform the House at this stage that at 8.35 this evening I received a telephone call—a very courteous call—from a solicitor who said that he was acting on behalf of this firm. Going on reports which had appeared in the newspaper the Newcastle Journal this morning, he claimed that I would he saying certain things which were not true. Let me say straight away that the firm was not even mentioned in the report in the Newcastle Journal.
I am not raising this matter as an issue of privilege, but I think I should put on record this attempt to intimidate a Member of Parliament in performing his duty in raising a matter of public importance in the House in the name of his constituents and, indeed, in the name of the general public. It is really regrettable—at this stage I shall not use stronger language—that such an attmept should have been made, presumably with the purported intent of seeking to gag Parliament.
The firm to which I have referred sold a system of electric central heating which was known as the "Sahara" system. This is a system referred to in an article in The Sunday Times newspaper of 11th May, under the appropriate headline.
The Great Central Heating Scandal".
I want first to mention the experience of my constituent, Margaret Swinburn, of Annfield Plain. The normal method of approach is to distribute leaflets in an area asking people whether they are interested in a certain appliance—in this case various systems of central heating, gas, electric, solid fuel, and so on. Miss Swinburn replied indicating that she would be interested in a system of solid fuel central heating. The salesman duly called at her home and she was persuaded, against her better judgment, to purchase an electric system at an estimated cost of £480. After the salesman had left, she thought it over and decided to cancel the order, and so informed the firm, whereupon the salesman called again and again. On the third occasion he called quite late in the evening and left only at around 11 p.m., when Miss Swinburn's brother appeared on the scene and ordered the salesman out of the house.
Miss Swinburn was lucky, because she had the good sense to complain to the Durham County Council Consumer Protection Department. Thanks to the department's advice and intervention she was able to become disentangled from any further dealings with this firm.
Another of my constituents, Mr. William Middleton, of Catchgate, was not so fortunate, and his experience is among the worst of those which have so far been drawn to my attention. He expressed an interest in a gas system of central heating. When the salesman called, Mr. Middleton was quoted a cost of £895, and was persuaded to purchase an electric system which was quoted at a cost of £660, although according to the hire-purchase agreement that he was persuaded to enter into the total cost worked out at £1,082.
My hon. Friend will, I am sure, confirm this point or otherwise when he replies, but I think I am correct in saying that, according to law, a customer has a period in which he can reconsider transactions of this sort, and that this should be made clear to him at the time when the transaction is entered into. This was not made clear to Mr. Middleton, and there was a statement in the documentation connected with his order that it was not subject to cancellation. Not only was he not made clear of his rights; within 12 hours of his signing the papers the workmen appeared at his home and started to install the system.
It is very clear from the numerous complaints that I have had from constituents that the right to cancel has not been made clear to a number of other customers. The salesmen always claim that the operating costs will be low. Mr. Middleton was told that the cost would be £2·24 per week, and would not exceed £3 per week even in the winter. He used the system for six weeks without realising what it was costing him.
The circumstances in which he came to realise what it was costing are rather interesting. He saw the BBC television programme, "That's Life", which is shown on Saturday evenings and does quite a lot in the cause of consumer protection. Apparently one evening this programme was dealing with the cost of

electric central heating systems. As a result he read his meter and, in his own words, he had "a fright". He had been told that his existing use of 32 units of electricity per week would be halved. He found that in fact it had increased fourteenfold, to over 450 units per week.
In every case which has been brought to my attention, people of modest means have been coerced into commitments involving hundreds of pounds. In many cases, they have found that they could not afford to run the installations for which they had paid so dearly and, in fact, suffered miserably during the cold north-east winter.
These unscrupulous operators have left behind not customers but victims, and a trail of misery, especially amongst elderly people, who, in some instances, laid out their life savings to assure themselves—they thought—of a warm, centrally-heated home for the winter.
There is no doubt that there are victims of these techniques all over the country. I quote as evidence of that the growing volume of publicity via Press, radio and television. I make the point that this publicity is very much to be welcomed, because it seems to be one of the best means of alerting people to the dangers of this sort of approach.
I say in passing that on 1st May, the two weekly newspapers circulating in my constituency, the Consett Guardian Chronicle and the Stanley News, highlighted on their front pages an excellent article by their reporter, Mrs. Elaine Johnson, warning people of these activities. This has resulted in the bringing to light of many cases of people having seen the article and having now approached the consumer protection department, contacted me, and so on. This shows that local papers, in addition to the national Press, have a valuable job to do.
I cannot let this occasion pass without paying tribute to Mr. Clifford Bateson, divisional trading standards officer for the Northern Division of the Durham County Consumer Protection Department, who is ceaseless in his efforts to protect consumers and who has provided me with a great deal of valuable information and taken many practical steps to protect people against this kind of approach.
One of the most disturbing features of these operations is that they bring discredit upon reputable salesmen who perform a valuable service and whose services are widely appreciated. In many instances they are people who are known to their customers, who perform a valuable job in door-to-door selling, and who have been doing so for many years. It is sad that they, too, are discredited by the activities of these unscrupulous operators.
It is easy to say that people are the victims of their own gullibility, but people feel safe in their own homes. They do not expect to be assaulted physically, verbally or emotionally in their homes by psychologically applied techniques. Because they do not expect it, they are more vulnerable to glib and unscrupulous operators than they would be when shopping, say, in a market outside their homes.
I am aware that powers exist to protect people under the Fair Trading Act, and the Trade Descriptions Act and with the Director General of Fair Trading, with whom I have been in touch about this matter. As I understand it, he is in the process of collecting evidence about the activities of door-to-door salesmen, and I understand from him that when the Consumer Credit Act comes fully into operation, which is expected to be next year, he will have very strong powers to examine the standards of door-to-door salesmen and, in fact, will license them.
I hope that my hon. Friend the Under-Secretary can give me an assurance—perhaps it would be more accurate to say "a reassurance"—about the determination of his Department to make the teeth of existing legislation and legislation which is to come really bite.

9.59 p.m.

The Minister of State, Department of Prices and Consumer Protection (Mr. Alan Williams): May I congratulate my hon. Friend the Member for Consett (Mr. Watkins) on taking this opportunity of raising a matter which is of considerable public importance. I should like to thank him for the compliment which he has paid to his local trading standards officers, because they and their colleagues throughout the country are doing tremendous work on behalf of the consumers that is very often unrecognised. I should also like to congratulate my hon. Friend on

arranging that the Adjournment be taken at such a sensible hour.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Miss Boothroyd]

Mr. Alan Williams: I thought, Mr. Deputy Speaker, that at that stage I could go home.

Mr. David Watkins: Not before my hon. Friend has answered me!

Mr. Williams: That is something I should not dare do.
I was very concerned about my hon. Friend's reference to the telephone call that he received from a solicitor. I do not know the full circumstances of the call. If it were merely an attempt to remedy a factual error, it was in order, but if it were an attempt to intimidate a Member of Parliament and to deter a Member of Parliament from raising a matter of public concern in the House, I am sure that my hon. Friend should consider whether he should ask for this matter to be looked at as a matter of privilege. However, that is a matter for him to decide. He knows that the House always takes such a situation very seriously.
I should also like equally to pay tribute to The Sunday Times for a well-researched article which helped to focus attention on this issue and also to the programme "That's Life" which did a valuable research and publicity operation in this sector.
My hon. Friend has correctly said that the majority of doorstep traders are decent, honest people who want to carry on a normal commercial enterprise and to be fair to the people with whom they are dealing. It is as unfortunate for them as it is for the public that their reputation suffers every time there is a story of the minority of rogues who all too often catch people who are unable to protect themselves. The trouble has become perhaps more acute because instead of it concerning the sale of brushes, polishes or dusters, in the gadget community into which we have now moved, all too often the goods which are being sold are not only intricate and difficult to assess


at the time of purchase but also tend to be high cost.
Because they are high cost they are often transactions which are undertaken in conjunction with an arrangement for a credit deal sometimes running into many hundreds of pounds. I know that in the case of central heating sales to which my hon. Friend has referred there have been very considerable sums of money involved. Although there is some protection, the rogues have found a way round it. We are now in the process of finding a way around the rogues' method of avoidance.
Let us examine the type of abuse which can arise from doorstep sellings. Attention has been drawn to a whole series of such matters, but, as we have this opportunity in the House to add to the publicity which enables the public to be cautious when approached even on their own doorstep, it would be useful to outline one or two of the methods which have been employed.
There is, for example, the method of telling someone that if he had certain work carried out on his house, such as rendering a wall with a particular waterproofing material, his house will then become a show-house for the area and he may then receive a discount or a commission for any new customer who goes to a firm as a result of looking at the house. All too often the same offer has been made in respect of several other houses in the area. In many instances no one appears and it is a spurious offer. It is an offer which would have to be honoured should the situation arise in which people in fact came to look at the house, but all too often no one ever comes and no commission arises.
A further abuse is the educational approach, with a person explaining that an educational survey is being carried out, perhaps in relation to certain types of books and equipment. It is only when the salesman has managed to get into the house that he reveals that it is not a survey but that all he is trying to do is to sell encyclopaedias or other books to the householder.
There was a variation of that approach by which many people were caught. I remember referring to it during the Committee stage of the Fair Trading Bill. Large numbers of people purporting to be

overseas students working their way through college or around the world were appealing to people's sympathy, asking them to give them orders to enable them to pay their college fees and to complete their education.
Sometimes people pretend that they are undertaking a research survey. This is an easy method. The public are fairly accustomed to such surveys, and are taken in. It is not always a matter of gullibility. If it were pure gullibility one might say that the public should do more to protect themselves. All too often we are dealing with skilled con men, who know very well the type of appeal that may be successful with the householder to whom they are speaking. They may make a health approach in one house and a completely different approach in another.
Another type of sympathy selling, which is a variation of the raising fees for study approach, is the pretence that certain products are made by disabled people. There has been an attempt to limit this, but the rogues, who are heartless in the way in which they carry out their activities, do not care what damage they do to the sales prospects of those genuinely selling goods produced by the disabled. They have managed to devise techniques whereby for a minimum contribution of work, sometimes just placing something in a package, they purport to be selling goods which have originated from work by the disabled.
Then there is the sheer pressure approach. Pressure can take various forms. As my hon. Friend said, it can be a mere rush of words, a continuous barrage of persuasion which in the end forces the householder in desperation to say "All right, I'll buy something", to get rid of the salesman. That would not apply to something as heavy as a central heating system, but it can apply to many small items. Whilst small items may not amount to much individually, if such sales take place several times in each road they can lead to considerable financial killings by those carrying out this form of deception.
There is also the sheer misrepresentation, which is perhaps most clearly brought to public attention by the sort of example my hon. Friend gave, that of central heating, where there have been false claims, completely unsound claims.


about running costs. The public cannot establish until many months after they have had the appliances installed that those appliances do not live up to the claims. While there is equal legal protection whether the claims are in writing or by word of mouth, it is much more difficult for the consumer to establish a case in court when it is a purely oral claim. All too often that sort of misrepresentation occurs where we are dealing with high-cost goods.
Then there is the novel approach of the person who says that he wants to offer a cheap service, or even in some cases a free service, for old electrical equipment. Having look at it, he may decide that it is beyond repair, and he then proceeds to try to sell another product which, conveniently, happens to be available.
There are also the phoney offers of discounts if a person purchases on the first visit. This is a sheer attempt to stampede people, and it is here that people should be very cautious. If a firm is willing to offer a huge discount on this visit, it is not likely that that firm will offer a substantially different price on the second visit, yet some people fall for this con trick, believing that they will get the benefit of a high discount if they sign up quickly. All too often they are unable to escape from the deal into which they have entered, particularly as it is not uncommon for agreements not to be drawn up in a very precise and accurate way, and one ends with agreement forms which have been sketchily and inaccurately completed and which therefore do not provide an adequate basis for legal action subsequently.
These are among a whole series of methods used, and I am sure there are more. My hon. Friend indicated that the Office of Fair Trading is now inquiring into the techniques which are employed. There is legal protection, and it is very effective in many areas. There are certain sectors in which it is less effective than this House would have wished at the time the legislation was passed. The Hire Purchase Act, 1965, allows a four-day cooling off period, to which my hon. Friend referred, but the method of getting round this is by having people enter into what is not strictly a hire-purchase deal. As my hon. Friend knows, hire

purchase is merely one form of credit transaction.
During the passing of the Consumer Credit Act I was told by the Finance Houses Association that one can have more than one hundred different forms of credit agreement to choose from in the credit field. As Parliament devises protection which applies to one particular form of credit, new forms of credit agreement are devised which are not covered by the law. My suspicion would be that in the instance to which my hon. Friend referred the deal was based probably on a personal loan, which is a separate transaction altogether. Then the sale technically becomes a cash sale and the doorstep salesman avoids the protection that this House intended all purchasers by credit to have.
It is for that reason that we have taken further steps in the Consumer Credit Act. My hon. Friend will be aware that we shall now be extending the cooling-off period from four to five days for transactions over £30. This is necessary because it is not only the kind of problem to which my hon. Friend referred that has arisen in this sector. There have been far too many instances of people buying expensive equipment, perhaps freezers or other expensive electrical appliances, on credit on the doorstep and then either not receiving the goods, perhaps because the firm has gone into liquidation, or upon receiving them, finding the goods inadequate. If either they do not receive the goods or they return them as inadequate, they may find difficulty because they have entered into a separate transaction for credit and that under the agreement, or the piece of paper that they signed, the finance house did not pay money to the householder but paid it immediately to the supplier of appliances. They had thus entered into a credit deal, and though they had never received the money, they had entered into an obligation to repay it and still had a commitment to repay that debt, even though they may never have received the goods or may have returned them on the ground that they were inadequate.
In an article dealing with these central heating abuses it was pointed out that in one case a purchaser had several hundred pounds worth of this equipment


stored away in his loft because it was too expensive to run, and yet he was still having to pay under the credit agreement for the purchase. This was an abuse which had to be covered. We covered it several ways. First, we have made the finance house equally responsible in the case of a deal. All too often it is impossible to find the people who sell these products since they move from one address to another and it is therefore impossible to initiate legal action.
We put upon the finance house the duty of ensuring that it is careful in the people it allows to act as its agents and if it is faulty in the selection of agents it must share some of the responsibilities for the difficulties and hardships which the consumer suffers. In any case, we feel that a finance house, with its wide connections, is far more likely to be able to pursue a trader who is guilty of such an abuse than is an ordinary member of the public. The finance house can eventually reclaim its money from the trader.
Another requirement is that anyone who is engaged in any sector of the credit industry, be it someone advancing money, someone selling via credit, someone involved in debt collection, or someone operating a credit reference agency—the sometimes-termed "blacklist"—will have to have a licence. That licence is granted by the Director General of Fair Trading, and one of the factors he takes into account in determining whether to give a licence, whether to review it or to revoke it, is whether the person applying for the licence or holding it has any record of using unfair methods to the consumer in order to obtain deals and credit agreements.
Therefore, the action open to the Director General is far more effective than being able to impose a fine of a few hundred pounds. He will be able to tell someone that that person has gone far enough. He will be able to say that one wrong step is a mistake and that perhaps a second wrong step is a mistake, but that after that a clear record is established of someone who seems deliberately to be indulging in a dubious trading method or who was not diligent enough to ensure that his trading methods were fair to the public. In these circumstances the person would be put out of business by being refused a licence. The licensing

system will be a very good club with which the Director General will be able to beat into line some of the more dubious and shady practitioners in credit sales.
There is also the Trade Descriptions Act. I know from discussions that we have had in various Committees that my hon. Friend is well aware of the operation of this Act. It is important not to underestimate its value for the consumer. It makes it a criminal offence to mislead the public as to the performance and the physical characteristics or behaviour of a product. As my hon. Friend knows, the enforcement officers under this legislation are the weights and measures officers or the trading standards officers, whatever they are called in any part of the country. They will certainly give very willing help to any member of the public who feels that the Act has been breached.
It is worth pointing out that under the powers of criminal courts legislation it is also possible, where there has been a conviction under the Trade Descriptions Act, for the court, in addition, to award compensation to the consumer for any loss he may have suffered.
We and the Director General of Fair Trading are carrying out a review of the operation of the Trade Descriptions Act, and certainly I will bear in mind the points which my hon. Friend has made. In addition, there is, as he has indicated, a study being carried out by the Director General on doorstep selling. He is eager to have any information that is available on new methods, new abuses, so that these can be incorporated in the proposals which he will eventually put forward.
In the meantime, the Office of Fair Trading is also preparing a leaflet for the public to help—as I hope this debate will help and as the articles in the Press and the items on television have helped—to focus public attention on an area of abuse which could be markedly diminished, if not abolished, by public awareness of the types of duplicity and trickery to which some of these rogues resort.
May I give him this assurance, that as far as the Government and the Director General of Fair Trading are concerned, we regard these not as petty crooks, because in all too many instances they are


making a great deal of money out of these shabby and shoddy operations, but as people who should be put out of business. We have made a start in the Consumer Protection Act and will be bringing forward legislation that will complete the task. Between the Consumer Protection Act and the recommendation that will eventually come from the Office of Fair Trading we hope, if we cannot put everyone out of business who is a dubious operator in this sector, to make life much more difficult for those who remain in the business and to be able to put the vast majority of them out of business.

Orders of the Day — HOUSING (BURTON-ON-TRENT)

10.23 p.m.

Mr. Ivan Lawrence: I am grateful to the Minister for this opportunity of even four minutes to raise in this House the problem of the desperate housing deficiency in Burton-on-Trent.
The most romantic, imaginative and polemical orator could not describe Burton-on-Trent as a town of great architectural beauty. In the great hey-day in the nineteenth century, in Burton when one could get a drink for a penny and dead drunk for twopence, and the great names of the British brewing industry had their empires in our town, they threw up thousands of workers' cottages which have now become little better than slums. They are still standing drab, monotonous, shabby, in their terraced rows—a tribute to the builders but not to the architects. They are solid but deficient in the basic amenities, with no bath or inside WC or hot or cold water or wash-hand basins.
That is a familiar enough tale in the Midlands, but Burton's problem is far worse than the national average. In a town of perhaps 20,000 houses, 9,800 are pre-1914, 6,000 are in a poor state of repair, 7,000 are without the standard amenities and 800 are owned by the local authority and in desperate need of modernisation. It is to that issue that I address the Minister.
It would be churlish to apportion blame. The fact is that we now have a vigorous East Staffordshire District Council determined to do something about it. Encouraged by Government

circulars and ministerial statements, they have determined to end the housing despair and deficiency. They have planned to tackle the task sensibly and with practical restraint. They aim to build 300 new houses over the next five years and to improve 150 houses a year. They have determined to end the housing misery by 1980–81.
Imagine, then, the blow when the request for £411,000 for modernisation was turned down and an allowance of only £50,000 was made by the Department of the Environment. That means instead of modernising 150 houses a year, modernising only 20. The result of that will be not only bitter disappointment and despair for tenants who have been happy to see that their council has been committed to this widespread redevelopment, and a serious set-back in the programme and a blow to the enthusiasm and devotion of the councillors and officers who are committed to the scheme, but also the further deterioration of council houses to the point where they become clearance areas and therefore more expensive. This will throw the whole new building programme out of gear.
I have raised this issue to ask the Minister to consider Burton as a special case. Its housing situation is far worse than the national average. Its application has been cut not by 50 per cent. but by 87 per cent.. The proportion of harm that will flow from the failure to have a substantial increase in the amount that has been offered will be greater than will occur in most towns in the Midlands. Where the new local authority has acted so responsibly, that is a very sad blow.
Basic housing amenities are a right which ranks high in the order of today's priorities. I ask the Minister to be good enough to offer Burton a thread of hope—a small sum of money out of the £44 million which he has released for special cases. I ask him not to be too rigid in the application of the rule of thumb by which he has laid down a measure for the allocation of extra resources. It is not my nature to beg, and perhaps the Minister will never again see me do this. If he does want a repeat performance he had best give me a crumb or two worth humbling myself for.

10.26 p.m.

The Minister for Housing and Construction (Mr. Reginald Freeson): I express my appreciation to the hon. Member for Burton (Mr. Lawrence) for passing certain papers to my Department at short notice so that during the short time I have had to prepare for our few minutes together I could have an idea of the points which he wished to raise.
I will go briefly through the position as we have experienced it. The position on the control of expenditure on improvement schemes is that it is firm Government policy, despite doubts expressed in several quarters, to move away from capital expenditure on improving pre-war and inter-war council estates—which no doubt are in need of improvement but have all the basic amenities—towards spending that money on council-built and council-municipalised, substandard obsolescent dwellings. This requires a transitional period. Most of the money available this year has gone to committed contractual works, most of which received 76 per cent. Most of those properties do not come within the priorities we have now laid down, but there will be a progressive shift.
Time prevents me from describing more fully the background policy, but I shall turn to the position in East Staffordshire. There is no doubt that East Staffordshire is in need of an urban renewal strategy. The Department has been in touch with the new authority during the past year to try to get a rehabilitation and urban renewal strategy under way. We still intend to give it backing, although we are under some financial constraint.
Cutting through all the correspondence and all the contacts there have been in the short time available to me this even-

ing, I can say that a meeting has been arranged for 16th June between officials of my Department, at regional level, and the local authority officials to go into detail about what comprises the proposal of urban renewal strategy briefly referred to by the hon. Gentleman.
If it is clear that there is a practicable and workable programme, part of which is a rehabilitation programme, it will certainly be my wish to try to provide, from the £44 million which I have available for this programme nationally, an additional allocation to East Staffordshire so as to increase the amount of activity this year even if it is not possible to achieve the full programme.
The main objective still remains that, whatever the difficulties in this area, however we may be able to assist after a practical programme has been discussed on 16th July, we shall still work with the local authority—and with many other local authorities—for a period of years ahead, not just one year, to achieve a satisfactory strategy whereby the resources which are available—they are limited; we have between £200 million and £300 million—will go primarily to rehabilitating substandard, obsolescent properties throughout the country and will not continue to be spent largely on properties which already have the basic amenities—as has been the practice for the last three to five years. That is the policy, and I assure the hon. Gentleman that if it is possible within the resources available to me—

The Question having been proposed at Ten o'clock, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.